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