| Penny stocks are stocks that normally hold a | | | | that issue penny stocks do not have enough |
| face value of less than $5. Many small | | | | reportable history to learn a significant |
| companies offer these low-priced stocks to be | | | | amount about them for those investors |
| traded on the Over-The-Counter-Bulletin-Board | | | | interested in doing research prior to |
| (OTCBB) and the Pink Sheets. This is mainly | | | | investing their money. This is also due to |
| because neither the OTCBB nor the Pink Sheets | | | | the fact that the OTCBB and the Pink Sheets |
| require the same minimum requirements as the | | | | do not have to issue financial |
| NASDAQ or the New York Stock Exchange (NYSE), | | | | statements.Potential for fraud: Penny stocks |
| set by the Securities and Exchange | | | | are often sold through spam email or |
| Commission. Businesses that are new or close | | | | off-shore brokers by con artists due in large |
| to bankruptcy may issue penny stocks as a | | | | part to the lack of regulation that penny |
| quick and easy way for these businesses to | | | | stocks are not forced to abide by or suffer |
| create quick capital and try to save the | | | | from.Although some penny stocks are |
| business from having to file bankruptcy in a | | | | fraudulent and others are companies facing |
| court.As you can imagine all of the | | | | bankruptcies, this is not true in every case. |
| aforementioned factors- low price, lack of | | | | Quite possibly some of the businesses will |
| stability and lack of standards- make penny | | | | one day be listed on the NASDAQ or NYSE, but |
| stocks one of the most risky investments for | | | | are currently struggling to meet the |
| anyone that is interested in playing or | | | | requirements. The opportunity to start with |
| trading on the stock market. The fact is | | | | these companies from the very beginning can |
| most penny stocks do actually end up in | | | | pay off in the end, given the growth |
| bankruptcy, but the lure of the great payoff | | | | potential. If you are able to get in on the |
| if a company does succeed, is enough for many | | | | ground floor with a company that does find |
| people to pursue the buying and selling of | | | | success, you could ride all the way to the |
| penny stocks. There are many other reasons | | | | top.It can be difficult determining which of |
| why penny stocks are risky and it | | | | these stocks has the potential for growth. |
| includes:Low or poor liquidity: Since penny | | | | The easiest way to become a victim of fraud |
| stocks are not traded very frequently, there | | | | is to do little, or even worse, no research. |
| may be difficulty finding a buyer. To | | | | Obtaining this information can be time |
| interest someone in buying these stocks, the | | | | consuming and difficult, unless you have a |
| price may have to be priced substantially | | | | very good knowledge of what it is that you |
| lowered.Little or incomplete information | | | | are seeking. |
| about the company: Most of the companies | | | | |