What are penny stocks?

There is no set, accepted definition of penny stock. Some people define it as stock priced under one dollar, some under five dollars. Some people include only those securities traded in the “pink sheets”, some include the entire OTC market. The Securities Division considers a stock to be a “penny stock” if it trades at or under $5.00 per share and trades in either the “pink sheets” or on NASDAQ. In addition, a true penny stock will have less than $4 million in net tangible assets and will not have a significant operating history. (In other words, if a company has real assets, such as equipment and inventory, and is engaged in some real business, such as manufacturing, then the Division does not consider the stock to be penny stock even though the shares are low-priced.)