What are Penny Stocks?
Penny stocks are common shares of small public companies that trade at low prices per share. In the United States, the SEC defines a penny stock as a security that trades below $5 per share and is not listed on a national exchange. In the United Kingdom, stocks priced under £1 are called penny shares. These types of stocks are generally considered to be highly speculative and high risk because of their lack of liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. Trades are often done through the counter through the OTCBB and pink sheets.