Penny stocks, also known as
cent stocks in some countries, 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, is not listed on a national exchange, and fails to meet other specific criteria. In the
United Kingdom, stocks priced under
£1 are called
penny shares. In the case of many penny stocks, low market price inevitably leads to low
market capitalization. Such stocks can be highly
volatile and subject to
manipulation by
stock promoters and
pump and dump schemes. Such stocks present a high risk for investors, who are often lured by the hope of large and quick profits. Penny stocks in the USA are often traded over-the-counter on the
OTC Bulletin Board, or
Pink Sheets. In the United States, the
Securities and Exchange Commission and the
Financial Industry Regulatory Authority (FINRA) have specific rules to define and regulate the sale of penny stocks.