Business Glossary

low priced, highly speculative stock. A penny stock is usually traded on the over-the-counter (OTC) market , but the New York and American stock exchanges also list penny stocks. Penny stock issued by a company with a short life or with past instability in operations. These stocks typically experience volatility in price relative to the stock of established companies on the major stock exchanges.

defined by the SEC as a security that sold for less than $5 per share and was not listed or authorized for quotation on a NASDAQ market exchange. Penny stocks are issued by companies with a short or erratic history of revenues and earnings, and therefore such stocks are more volatile than those of large, well-established firms traded on the New York or American stock exchanges. Many brokerage houses therefore have special precautionary rules about trading in these stocks and the Securities and Exchange Commission (SEC) requires that brokers implement suitability rules in writing and obtain written consent from investors.

All penny stocks are traded Over-The-Counter many of them in the local markets of Denver, Vancouver, or Salt Lake City. These markets have had a history of boom and bust, with a speculative fervor for oil, gas, and gold-mining stocks in the Denver penny stock market in the late 1970s turning to bust by the early 1980s.

stock that typically sells for less than $1 a share. Penny stocks are issued by companies with a short or erratic history of revenues and earnings. Such stocks often are more volatile than those of large, well-established firms traded on the New York or American stock exchange.