What Are Penny Stocks
Penny stocks are sold in a market where shares of companies are usually exchanged for less than $1. It’s where Leonardo Di Caprio in the movie “The Wolf of Wall Street” begins to forge his legend. The truth is that part of what appears in the film is true,. Penny stock companies are usually very small with hardly any liquidity, whose headquarters are in many cases garages or the home address of the founder of the company.
These companies have a common feature: they are companies whose market value is very small, which causes the stock price to be very volatile. This means that stock prices vary widely, leading to sharp rises and sharp price declines. By not having enough stock, it is easy to buy many and therefore push the price of the stock up or down with little money, so many investors can easily manipulate the prices of those shares to their benefit.
That is why it is one of the ideal markets for investors who want to speculate. The ups and downs of prices of these companies translate into quick profits for investors and also without the need to spend much money to invest in them.
An example of this speculation was what happened with the marketing company H & H Imports Inc. This company, which was dedicated to selling consumer goods through commercials, was praised through Twitter by a famous stock investor and caused shares of this company to go from 1 cent to 45 cents within hours of the tweet.
Although it may seem small amounts, in relative terms this company multiplied its value by 45X, meaning investors also made a 4,500% profit.