Info 1: penny stock definition
Info 2: how penny stock works
Info 3: penny stock vs small cap
Info 4: example of penny stock
Opening information:
Penny stock breaks into two words penny and stock, penny means dollars or value of one small piece in whole things. Stock means product or item of shares which had some value.
Penny stock means item of shares which are had lower price or value than a one dollar. So now let’s have a look what is a penny stock, how the Penny stock works in the sock market among the public Investors, and what is the difference between the penny stock and small cap stock, finally one clear example about the penny stock.
Info 1: penny stock definition
36-year-old woman named Luciana lives in Hawaii, a state in western USA . Luciana has completed courses in Management, Organization & Leadership. She has been interested in investing since she was a child and also invested in some companies in the stock market.
Luciana has invested in Yiti, a public company approved by the Security and Exchange Commission and sells shares in the public market. Yiti has been a public company in the public market for nearly 25 years, they manufacturer of refrigerators.
The total number of 50k shares in Yiti Public Company with value of $ 100 million. Of these, Luciana has a total of 5000 shares in Yiti Public Company and the value of the shares she purchased in Yiti Public Company is $ 10 million.
Luciana also owns 400 shares in Baycona medium-sized company. Baycona has a total of 3 owners, where it’s very small Industries.
Lastly she also hold 100 shares in Brown Sugar producer company named browni through over the counter madket , which that each shares are only priced of 1.20$ without approvals of SEC and stock exchange.
Here on the above 3 companies owned by Luciana, the last one we saw was the shares of browni company called penny stock.
Because any of the business stock which trade under 5 dollars without any approval by government agency with help of over the counter market, then such shares came in the penny stock category.
So let’s dive into know how the Penny stock works in the public market.
Info 2: how penny stock works
The penny stock doesn’t not represent any specific stock of Ownership, instead it’s a concept which shows the identity of small market cap stocks, which didn’t had enough liquidity and capital for such business.
The companies which lack the minimum requirements which are demands by all the stock exchanges Industries, which are trade over the counter.
Moreover when one business stock is very low such Industries stock are the had low share value price, this makes stock been very small purchased huge move, that’s why people’s called this as high volatile stock with less liquidity for no Investors.
Therefore any kind of stock which are lack the market cap and lack the one dollar value minimum, then such Ownership of shares of stock are called as a penny stock.
When one company had created thousands and millions of automobiles all over the world and sales it for nearly more than 1 billion dollars.
This same institution loss hundred and thousands of sales after the some times, after the new models of creating distraction from other automobile industries which makes the old models and non attractive product to lose millions and billions of dollars year by year.
This losses makes the shares drops in huge value or sometimes some Industries go bankrupt, when such business Shares drops below the 1 or 2 dollars and below of 1 million, then such business stock of shares are considered as penny stock.
On the other hand, unlike other business who made hundreds and billions of dollars each year, the companies who are new to market and won’t had enough capital to grow, low profits, lack of reputation extra…
Were most likely had low value of share, which is less than 1 or 2 dollars price, such stock are also called as a penny stock.
Obviously anything which are trade over the counter, that’s is below the less than 5 million market cap or one dollars value then such shares are demonstrate as a penny stock.
Most of the people’s confuse the penny stock and small cap stock, so let’s jump into know the key difference in it anyway.
Info 3: penny stock vs small cap stock
The difference between the penny stock and small cap stock are, the small cap stock are the one which are considered as to be as a Ownership shares, which are listed in the stock exchange Industries where above than 3 dollars valued.
Next the penny stock refer the stock which are not listed in the stock exchange, where less than a 1 dollars values, where didn’t had at least minimum of 10 million dollars in the market cap.
So the key difference between the penny stock and small cap stock are shares value difference, if such shares trading below the 1 dollars then it’s called penny or if not it’s small or mid or large cap stock.
To make you more clear about the penny stock, lets seen into one clear example anyway.
Info 4: example of penny stock.
Say the company Stock G had market cap of 1.2 million dollars and trading at a 0.30 cent for less than a single dollar,
Then stock D are the one which are trading at a 45 dollars per share in public market with market cap of 326 million dollars.
Here the stock D are the one which are illustrated as small cap stock and the stock G is the one which known to be as a penny stock.