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A penny stock is a type of equity security that trades at less than $5 per share. It is usually sold over the counter rather than on major exchanges such as the New York Stock Exchange or NASDAQ.A regular stock is a type of equity security that trades for more than $5 per share and is not a penny stock.
Penny stocks are often considered to be high-risk investments because they are usually very volatile and can be subject to manipulation by traders who have access to insider information about the company.
Penny stocks are traded below $5 per share. They are often sold over the counter. An article in “The New York Times” discussed “penny stocks” in October 2005.
It noted that penny stocks accounted for only one percent of all U.S. equities but that their share had been increasing because of online traders who typically did not check the companies’ books or investigate whether they had any assets.
William Dannemeyer, a regulatory compliance consultant and author of “Penny Stock Pump & Dump,” told the “Wall Street Journal” that the SEC has been using these settlements as more of a “slap on the wrist.”Investors are often enticed to purchase companies through PIPE financing structures.
These securities are high-risk, and for investors to be compensated, issuers must have cash reserves. To raise capital from outside the company, issuers must meet specific requirements, such as disclosing information about their business and financial condition.