In the United States of America, there is a common stock which trades for less than five dollar a share, and is traded over the counter through quotation services. This stock is called as Penny Stock. Penny stocks, although trades for less than five dollar share, can trade hundreds of millions for a sub penny stock in its volumes. Beside it, it is very difficult to find the legitimate information on the Penny stock companies, because the stock can be manipulated. Many investors are interested in the appeal of a penny stock in accordance with the relationship with the low price and perceived potential for rapid growth. It is usually happened when this penny stock are introduced in public or to the people. But, unfortunately, the people or the stockbrokers or founders do not realize that the penny stock has many risks.
It’s caused the penny stocks can lose all of their value in the long term. In the stock of a business, the penny stock is high risk investments and new investors have to be aware with the risks involved. The examples of the risks are limited liquidity, lack of financial reporting, and fraud. The limited liquidity can make it very difficult to sell a stock, especially if there are no buyers in a day. The limited liquidity also can make penny stocks much more vulnerable to be manipulated. So, the founders or stockbrokers must be careful if they want to invest a stock in a penny stock.