Penny Stock

Category: finance

Stocks of small companies that trade at very low prices, usually under $5 per share.

Penny stocks are the "high-stakes casino" of the market. They often lack the reporting requirements of major exchanges. They are highly speculative, prone to extreme manipulation ("pump and dump"), and have very low liquidity.

Common Examples

• The regulator issued a warning about the volatility and potential for fraud in the thinly traded penny stock market.
• Institutional investors are almost entirely restricted from holding penny stocks due to the extreme liquidity and transparency risks.