Pennystocks – these are stocks that are traded for a few cents, so for a few pennies, the English word for penny. Often these are companies that are about to go bankrupt or are already broke. Basically, all stocks in the eurozone are considered penny stocks worth less than one euro. Some actually cost only a cent. A price increase to two cents is already doubling the price. Nevertheless, these stocks are anything but a risk-free investment.
PENNYSTOCKS AT A GLANCE
Value below one euro or pound
Often values before bankruptcy
Today more penny stocks
RICH WITH PENNYSTOCKS
Deposit InsuranceThe famous stock market journalist and speculator André Kostolany once made a lot of money with penny stocks. Actually, after World War II, it was not about stocks but bonds. But the principle with which Kostolany succeeded was the same as buying penny stocks. In some countries foreign bonds were almost worthless. Nobody expected that the country could ever repay the debts – or even wanted. But Kostolany believed that the young Federal Republic would pay back the debts in order to have further access to the capital market in the future. In fact, the federal government announced the repayment, the price rose from the 250 francs, to which Kostolany had bought, to more than 35,000 francs. But not every junk bond or share is developing so well, Kostolany was often wrong.
WHAT IS EXACTLY A PENNYSTOCK
First of all, a penny stock is a stock whose value is less than one unit of the local currency, ie one pound in the UK or one euro in the Eurozone. In the US, the term is a little wider, where all values are valued at US $ 5.00 as penny stocks.
Often synonymous with the term junk stocks is used. In fact, most penny stocks are also stocks of companies that are about to go bankrupt. Until the 1990s, stocks had a nominal value of mostly 50.00 marks, more rarely also 100.00 or 1,000.00 DM, the stock market price was still much higher. Later, the minimum nominal value was reduced to DM 5.00, later introduced shares without par value. As a result, even halfway healthy companies can now cross the penny-stock limit faster.