Tag Archive | "sub penny stocks"

Before You Invest in Sub Penny Stocks


Sub Penny Stocks

The Profitable World of Sub Penny Stocks

Some people draw the line at sub penny stocks. Investing in penny stocks is a dangerous activity that also presents certain possibilities for profit. However, sub penny stocks are a basement to the dangerous edifice made up of penny stocks. These are stocks issued by companies that are often on the very edge of existence. As with any stock, though, this extreme danger provides an extreme opportunity for profit.

The possibilities should be easy to imagine if you are already a penny stock investor. If you buy shares of a company worth one-half cent each, then those shares need only to gain another half-cent in value in order to double the size of your holdings. The possibilities increase exponentially as the values of the shares decrease.

Tips for Investing in Sub Penny Stocks

If you are going to invest in sub penny stocks, then you should keep in mind a few simple guidelines to follow in order to preserve your wealth.

• Be prepared to lose your entire investment. This is not just a possibility. When you buy sub penny stocks, you can rest assured that you will lose some of your investments entirely. It is that risky. The good news is that even when you buy 100,000 shares of a half-penny stock, you stand to lose only $500.

• Do not be afraid of volatility. Volatility is your friend when you invest in sub penny stocks or any other stocks. You can use volatility to your advantage when you follow another critical rule about these investments.

• Diversify. When volatility sends one of your sub penny stocks into ruins, it may simultaneously make one of your share prices skyrocket.

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Trading Sub Penny Stocks


The Types Of Sub Penny Stocks

Sub Penny StocksPenny stock traders use specific stock trading strategies when trading sub penny stocks, which are stocks that trade for less than one penny in one one-hundredth of a penny increments. The potential for large percentage gains is what draws penny stock traders to trading sub penny stocks, but the nature of these lowly priced stocks requires implementing trading strategies that are tailored to sub penny stocks.

The reasons why penny stocks trade as sub penny stocks vary from companies that are just getting started and do not have the business fundamentals to support a higher stock price to shell companies that only exist on paper to companies that are on the decline and have an enormous amount of shares outstanding and in the pubic trading float, which can reach well into the billions of shares. This distinction is important since sub penny stocks with billions of shares outstanding and in the pubic trading float have a hard time moving higher and are likely to eventually undergo a significant reverse stock split that wipes out most of the value of those holding the sub penny stocks in their portfolio. These heavily diluted sub penny stocks are value traps that will eventually become essentially worthless and should be traded with extreme caution. It is not impossible to make some money on short term pops in these bloated sub penny stocks, but as long term investments, they are losers.

The Best Way To Trade Sub Penny Stocks

The two types of sub penny stocks trades that have the greatest potential to provide significant trading returns that can easily reach into the thousands of percent are sub penny stocks associated with companies that are just getting started and with shell companies. This is because, these types of sub penny stocks usually have a reasonable amount of shares outstanding and in the pubic trading float, which means that any positive news that is released can result in a significant move higher, without the overhang of tons of shares to hold them back.

Sub penny stocks associated with companies that are just getting started sometimes make quick moves higher when the development stage or young operating companies make significant announcement about business developments. Of course, nobody knows exactly when such announcement will occur, but many traders try to piece together the pieces of the puzzle surrounding sub penny stock companies and share their findings on stock chat forums, which are good places to find out which sub penny stocks have the potential to move higher and if anyone has caught of whiff of pending news announcements that may cause the sub penny stocks to soar higher in price.

Sub penny stocks that are associated with shell companies are much harder to trade. A shell company is a company with no business operations, but is in full compliance with United States Securities and Exchange (SEC) reporting requirements.  Shell companies often trade as sub penny stocks due to the lack of business activity. Occasionally, private companies do a reverse merger with a shell company that has a sub penny stock associated with it, which causes the sub penny stock to increase tremendously in price. Once again, stock chat forums, especially ones oriented towards trading shell company penny stocks, are the best place to find out about shell company sub penny stocks that may be poised to move higher.

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Reverse Merger Stock Plays


Reverse Merger Stock Plays – What Is A Reverse Merger?

Reverse Merger Stock PlaysA reverse merger stock play is a merger transaction in which a private company buys a publicly traded shell stock in order to go public and gain access to the capital markets without going through the cumbersome and expensive initial public offering (IPO) process.  A shell stock is a company that trades on either the Over The Counter Bulletin Board (OTC BB) or otcmarkets.com (Pink Sheets) and maintains a capital structure, but has no business operations.  Although shell stocks can trade for many years with no business activities, the owner of a shell stock has a strong incentive to keep the stock shell “clean” by filing all the required United States Securities and Exchange Commission (SEC) to keep the shell stock current with its SEC filings, which increases the value of the shell stock and makes it much more appealing to a private company looking to use it as a vehicle to go public.

To implement a reverse merger, a private company pays the owner of a shell stock company cash or private shares to obtain a majority of the shares of the public shell company, which gives the private company control of the public shell company’s board of directors.  Once in control of the public shell company, the private company mergers its business operations with the public shell company and becomes a publicly traded company which reflects the valuation of the newly public company.  Upon completion, a Form 8-K is filed with the SEC that reveals the details of the reverse merger to the investment community.  The 8-K filing includes audited financial statements and disclosures that the SEC requires of reporting companies.

How Individual Investors Can Profit From Reverse Merger Stock Plays

The bottom line for individual investors regarding reverser merger stock plays is that they can be highly profitable investments, if one buys in early on in the reverse merger process.  This is because shell stocks are usually extremely cheap penny stocks since they are not associated with operating businesses.  In fact, shell stocks often trade below one penny, which are known as sub-penny stocks.  Once word gets out that a private company is considering a reverse merger with a shell stock, the shell stock usually makes a tremendous move higher to reflect the possibility that it could be worth a lot more once the private company is in control, with the new company’s value reflected in the post-merger stock.

Reverse merger stock plays can get risky after the reverse merger has been completed and the formerly private company has taken over the public shell stock.  This is because the newly public company sometimes recapitalizes their newly acquired shell stock to raise money for business operations (which is why they go public) by undergoing a reverse stock split.  This can dilute existing share holders out of much of their equity in the post-merger company.  Sometimes there is no reverse split after a reverse merger and existing shareholders do quite well, if the company that took over the shell stock prospers and the stock appreciates.  Reverse merger stock plays are stock trades that all penny stock traders should understand due to their tremendous profit potential.

For information on possible shell stock reverse merger stock plays, see the Reverse Mergers message board.

To learn more about how the penny stock market works, see: Why Invest In Penny Stocks, How to Invest In Penny Stocks, and Where to Invest In Penny Stocks.

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The Smallest Value of All Lies in Sub Penny Stocks


 SUB PENNY STOCKS CAN BE WORTH THEIR WEIGHT, BUT THAT IS NOT MUCH

Sub Penny StocksMarket analysts use the term penny stocks to refer to small fry investments that are below the value of five dollar, but sub penny stocks are even tinier ventures. These may be worth literally fractions of a cent, making it possible for an investor to accrue thousands or even millions of such stocks without much more than a moderate sum of cash. Financial advisers often kick these around, as their value is often low for a reason. Market experts see little to no reason for them to increase in value much, even to the point of a few cents (let alone over a dollar) in the span of months or even years. These may be public companies that are based in small cities, having limited customer bases, provide few services, or only have seasonal sales. In any case, they are an interesting look at the market on a very small scale.

CAN SUB PENNY STOCKS EVER BE WORTH A FULL CENT?

The usual value of sub penny stocks is to be included in a larger amount of shares when traded as a balancing act. These shares may not see their value increase much, but when traded in bulk they are successful to the point where a small increase (or decrease) can be an immense gain (or loss).

Some rare events might cause the value of sub penny stocks to surge: the increased cost of oil in May and June caused the price of Abraxas Petroleum to increase fivefold but it has since returned to the average. While these stocks see the greatest increase on a percentage basis due to their low price, few investors are willing to put the time and energy into researching potential booms as the overall odds of a positive return on sub penny stocks is very low, despite how inexpensive it is to acquire shares.

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