Penny stock

A penny stock is a low-priced security, generally outside the major listing standards, with thin trading and limited public information. The combination of a small float and sparse disclosure is what makes it the standard vehicle for promotion fraud.

instruments and markets · updated 2026-10-16

Where does penny stock come up?

This term is used in the following manipulation techniques, each explained in full on its own page.

• Pump and dump — A pump and dump is a scheme in which shares are accumulated cheaply, promoted with misleading claims to drive the price up, and then sold into the demand the promotion created, leaving later buyers with the loss.
• Paid stock promotion — Paid stock promotion is publicising a security in exchange for compensation, which is lawful only if the fact of payment, the payer and the amount are fully disclosed under Securities Act Section 17(b).

Enforcement actions involving these techniques

See also

• Float — The float is the number of shares actually available to trade, excluding restricted and closely held stock. A small float makes a …
• Over-the-counter market — An over-the-counter market is trading conducted off an exchange, through dealers. For small issuers it means fewer listing require…

Terms that refer here

Float · Over-the-counter market · Penny stock bar · Trading suspension

Back to the full glossary — 282 defined terms.