Penny stocks are the normal stocks which a share can be traded for for less than $5. In the US financial markets, moreover, “penny stocks” are traded outside NYSE, NASDAQ or AMEX and are sometimes looked down upon, hence, considered pejorative.
Nevertheless, SEC defines “penny stock” as the stock that has a low price and a speculative security that matches a small company whether it works through exchanges like NYSE or NASDAQ or the OTCBB and PINK SHEETS (two forms of “over the counter” listing services).
“Penny Stocks” are also sometimes referred to as “nano caps”, “microcap stocks” and “small caps” although penny stocks are mostly determined by share price and not listing service or market capitalization.
On the other hand, in the UK, penny stocks- or shares- mean the shares in small cap bodies that have a market capitalization of less than £100 million or whose share price is £1 and whose bid spread more than 10%.
The British penny stocks, moreover, are issued with the FSA (Financial Services Authority) warning. In France, the same term refers to risky stocks whose price is lower than 1 Euro.
Having market caps that are less than $500M, penny stocks (especially those trading on low volumes over the counter) are usually considered very speculative. They, moreover, are sometimes difficult to sell due to the fact that it is not always easy to find quotations for certain kinds of them. In other words, if you are thinking of investing in penny stocks, be prepared for the possibility of losing all your investment.
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Source: www.articlesbase.com
