OTC Penny Stock (Pink Sheet)
What are OTC Penny Stocks?
Over-the Counter (OTC) Penny Stocks are stocks that are currently unlisted from an official stock exchange (Example: NASDAQ, NYSE) that can be purchased usually for under $1.
These stocks belong to companies that are currently speculative and have yet to achieve major success. These companies also have low market capitalization compared to companies listed on official stock exchanges.
Examples of OTC Penny Stock
Puration Inc. (PURA) – Cannabis-infused beverage producer
Hypersolar Inc. (HYSR) – Hydrogen production company
Netlist (NTLST) – Computer memory/storage designer and manufacturer
Prices are usually under $1, allowing investors, especially those who have limited funds in their account, to buy a large quantity of stock.
Should the price increase slightly or should the company become successful, the investor may gain a large profit due to owning a large number of the stock.
Because most penny stocks belong to relatively unknow companies, information on them (such as financial reports and company history) may be scarce.
OTC Penny Stocks are not strictly monitored compared to listed stocks and are therefore more susceptible to criminal activity such as fraud and pump-and-dump schemes
These stocks usually lack liquidity and therefore are more difficult to buy/sell
Almost all penny stock companies lack the capacity to generate profit and usually run at losses, these stocks are more likely to hit the price of $0 and cause the investor to lose their entire investment.
Because of the dangers of trading in OTC Penny Stock, trading accounts must be protected via security settings (2-factor authentication) in order to trade in these stocks
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