Yes
Both stocks refer to stocks that are trading at a price below $1. In most common cases, these are small cap companies that just went public and had cash flow or other financial problems. When you invest in them, you are betting that these companies only have a short-term financial problems which can be solved by having access to a bank loan for example.
But you are also running huge credit/liquidity/bankruptcy/ information risks asthese companies are delisted from the exchange market and are rather traded OTC (OTC means over-the-counter trading, a “face-to-face” trading)
However, depending where you are, and because the terms sometimes get confusing, penny stocks may refer to cheap stocks but are still traded on a regulated exchange market or for stocks with short term difficulties which are solved before delisting/unlisting.
February 1st, 2010 at 4:09 pm
Yes
Both stocks refer to stocks that are trading at a price below $1. In most common cases, these are small cap companies that just went public and had cash flow or other financial problems. When you invest in them, you are betting that these companies only have a short-term financial problems which can be solved by having access to a bank loan for example.
But you are also running huge credit/liquidity/bankruptcy/ information risks asthese companies are delisted from the exchange market and are rather traded OTC (OTC means over-the-counter trading, a “face-to-face” trading)
However, depending where you are, and because the terms sometimes get confusing, penny stocks may refer to cheap stocks but are still traded on a regulated exchange market or for stocks with short term difficulties which are solved before delisting/unlisting.