Penny Stocks

Penny Stocks

Finance is a fascinating field with much to discuss. The purpose of the present short essay is to describe penny stocks. Penny stocks are shares that are priced at less than five dollar ($5) in the United States of America, and under one pound (£1) in Britain and the United Kingdom, and called penny shares. Finance is considered a field of economics and is the study of financing and managing resources. Naturally, investing, investment and investment advice are also part of finance. Investment and finance related professions are highly regulated, and only licensed individuals have the right to serve as financial advisors and provide investment advice. In the U.S., the U.S. Securities Exchange Commission (SEC) and the Financial Regulatory Authority (FINRA) represent the two main organizations overseeing the financial industry.

Thus, penny stocks are cheaply priced stocks. Many people buy them in the hopes of making a large profit. Indeed, most people invest to generate returns. However, those who play the market, may at times end up being played themselves. For example, because of their low price, penny stocks or cent stocks may fall prey to fraud. Indeed, sometimes fraudulent investors or speculators will buy large numbers of low priced shares or penny stocks and artificially inflate their price per share. The process is called the pump and dump scheme, and a similar method has notoriously been used by rapper 50 Cent to make a substantial profit.

International Rose Garden of Montreal. Presented by the Rotary Club of Montréal-Lakeshore in Commemortion of the Centenary of the Canadian Confederation at the occasion of the Universal and International exhibition of 1967. Photo by Elena

The price inflation is easy to achieve using popular social media accounts, pretending to have insider information and thus inflating the shares' price but not value. Then, once the price is inflated the shares are sold and a profit is made by unscrupulous investors. However, while the SEC can put a halt on the penny stocks, the legitimate versus illegal manipulation falls under a thin, grey line. Legislation has been passed and the regulation depends on different criteria, but people have been jailed for acts related to penny stocks fraudulent manipulation. Nonetheless, a detailed discussion of the legality and laws surrounding penny stocks lies beyond the scope of the present short paper.

Ladies going to acquire penny stocks. Photo by Elena