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Market Basics
What are Micro-Caps?
What Is A Micro-Cap Stock?
The term 'Micro-cap Stock' is used to refer to stocks that are low priced. Low priced, in this case, refers to stocks that sell at, or less than, five dollars. Micro-cap Stocks generally trade in what is referred to as the Over-the-Counter (OTC) market, which would include the OTC Bulletin Board or the Pink Sheets.
Micro-cap Stocks are also referred to as Penny Stocks.
Where Do Micro-Cap Stocks Trade?
Micro-cap Stocks trade in the Over-The-Counter market generally on the NASDAQ Small Cap, OTC Bulletin Board (OTCBB), or the Pink Sheets. Micro-cap Stocks generally do not trade on the National Stock Exchanges, such as NASDAQ or the NYSE.
How Are Micro-Cap Stocks Different From Other Stocks?
The biggest differences between Micro-cap Stocks and other stocks relate to a lack of public information, listing requirements and investment risk.
Most Micro-cap Stocks do not have the same reporting requirements with the SEC.
Companies on the OTCBB or the Pink Sheets do not have to meet any minimum listing requirements, whereas companies that trade their stocks on major exchanges have requirements relating to total assets, minimum net assets, a minimum number of shareholders and total market capitalization.
Micro-cap Stock investments tend to be high risk because the companies tend to be new and have little or no proven track record.
Are Micro-Cap Stock Investments Risky?
Yes, all stock investments are risky! Especially Micro-Cap Stocks or any other company with little or no operating history. This also allows for explosive growth potential.
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