Penny Stocks To Buy For Pennies; Are They Worth It?
When you think about the definition of penny stocks, you probably aren’t looking at stocks that fit the “standard” definition. That includes cheap stocks under $5 that are public shares of smaller companies. If you’re trading low-priced stocks, you’re probably more focused on the popular definition, including stocks that trade for pennies. If you’re new to penny stocks or trading, in general, your first question might be, “Why would anyone want to buy stocks like these, and are they a good investment?”
Are Penny Stocks Worth It?
The first answer to the question is more straightforward. The cheaper the stock, the higher the volatility; theoretically, the bigger the moves can be on small price changes. That means a 50-cent stock that climbs only five cents experienced a 10% move. If a stock like AAPL or AMZN were to make the same price move, it wouldn’t mean much to someone holding shares. That move can happen in both directions, which makes cheap stocks incredibly risky.
Investing In Penny Stocks
Now to the second part of the question: are penny stocks a good investment? This is more complicated and depends on your risk tolerance. There’s usually a reason stocks trade at low prices, and rarely does it mean the underlying company is a market leader. We’re talking about two types of companies (with some exceptions).
The first is a start-up. These are companies with a minimal operating history that are just getting started. These grass-roots companies are new to the market and can spark intrigue among traders who want a “ground floor” opportunity. With that, however, comes a very high rate of failure. Due to cash constraints and operational costs to conduct business and remain publicly listed, companies trading for pennies can face an uphill battle. Does this mean all penny stocks are bad investments? No, and there are plenty of examples of stocks under $5 that became juggernauts in their respective industries.
On the other hand, you’ve also got companies with shares trading for pennies due to troubled businesses. Last year taught us that no company is immune to selling pressure or economic hardships. We even did a series called “Will XYZ Stock Be On Your List Of Penny Stocks This Year?“
Believe it or not, many companies eventually fell below the $5 threshold and remain there today. You can see a list of penny stocks that have household names behind them in the article “41 Household Stocks To Buy For Pennies Right Now.”
Penny Stocks: Risk & Reward
This takes us to today’s article and a list of penny stocks with even higher-risk attributes. In this case, we look at a handful of low-float stocks trading for less than $1. Not only is price a volatility factor, but so is the share structure of these companies. The “float” refers to the active number of shares available to trade in the retail market. It doesn’t include unregistered stock or restricted shares, for instance.
That means the lower the float, the fewer shares available in the market, and the lower the supply. Standard economics suggests that the price will rise when there’s a high demand/low supply situation. We saw this today from Genius Group Ltd (NYSEAMERICAN:GNS). It’s a low-float penny stock that was trading below $1 at the opening bell and has since exploded to highs of $2.15 during Thursday’s session. That move has prompted some sympathy sentiment specific to low-float penny stocks under $1.
Low Float Penny Stocks To Watch
Greenidge Generation Holdings Inc. (GREE)
The cryptocurrency data center and power company Greenidge Generation has benefited from the recent spike in the price of Bitcoin and other cryptos. GREE stock began 2023 at around 30 cents and has since managed to jump to highs of nearly $1.40. This week it’s back trading below the $1 level, but volume remains high.
No new updates have come out from the company in January. But the last update highlighted its moves to secure funding toward growth. For instance, Greenidge’s non-binding term sheet with NYDIG ABL LLC would see NYDIG purchase crypto miners, enter a hosting agreement with Greenidge, reduce some of the current debt of NYDIG, and Greenidge would pledge assets to NYDIG to secure the remaining balance of its loan.
CEO Dave Anderson also said, “If we complete this debt restructuring, this would improve our future liquidity and would provide a significant step toward the improvement of our balance sheet. In addition, we believe that the contemplated terms of a concurrently executed hosting arrangement would allow us to continue participating in the future upside potential of bitcoin.”
With a float below 20 million shares and attention on sub-$1 and Bitcoin stocks, GREE has been a part of the discussion within the Fintwit community.
Crown ElectroKinetics (CRKN)
Things got off to a strong start this year for Crown ElectroKinetics. The company hit the ground running and announced its first 2023 acquisition on the second trading day of the year. Crown purchased Amerigen 7, which focuses on distributed antenna systems and fiber optic infrastructure construction. At a purchase price of less than $650,000, the company seems optimistic that it will generate meaningful revenue in the long run.
Crown CEO Doug Croxall said in a press release, “The asset acquisition includes an executed purchase order with Charter Communications for $67 million to build out its fiber optic network in the State of Ohio. We expect to commence work in Ohio in the coming weeks. Additionally, the Crown Fiber Optic division will continue to focus on its existing fiber optic construction in the State of Michigan. Crown Fiber Optics is a prime contractor for Charter Communications in the States of Ohio, Michigan, Indiana, Wisconsin, and Pennsylvania. We are anticipating our Crown Fiber Optic division to generate approximately $30 million in revenue in 2023 while generating approximately $10 million in EBITDA.”
With fewer than 20 million shares reported in the float, CRKN stock has been put on the watch list by some retail traders in the stock market today.
Nogin Inc. (NOGN)
With a float of under 20 million shares, Nogin has caught some attention in the stock market today. The company provides eCommerce technology to its clients and recently announced its latest milestone. Nogin reported the results of a survey of direct-to-consumer brand manufacturing leaders. The survey demonstrated how these D2C brands rate existing technology and the challenges they face. Survey results showed that these respondents desire better enterprise eCommerce platforms.
In response, Geoffrey Van Haeren, Co-Founder and Chief Technologist at Nogin, said, “To come out on top and build an eCommerce business with true staying power, brand manufacturers need a comprehensive, intelligent eCommerce platform—one that not only restarts growth through enterprise-level features like personalization, microtargeting, and marketing automation but delivers on consumers’ rising expectations and lays the foundation for scalable profitability.”
A day after the news broke, NOGN stock has traded some of its highest single-day volumes since making its public debut.
Novo Integrated Sciences Inc. (NVOS)
Novo Integrated has seen some of its highest trading volumes following a unique transaction, and you’ll see what I mean. An 8-K filing recently showed that the company entered into a purchase agreement with SwagCheck Inc. to buy that company and 100% of its outstanding shares “in exchange for $1.00.”
The 8-K further highlights that SWAG holds “a specific right of purchase of a precious gem collection as provided for in an agreement between SWAG and a Court-appointed Successor Receiver for the United States District Court for the Central District of California.”
More specifics of the filing reveal that certain conditions must be met, including Novo receiving a $90 million financing commitment with $60 million being distributed “directly to a receiver for the purchase of the Gems by SWAG” and $30 million in “mark-up” distributed for the benefit of the outgoing SWAG shareholders.
Since the filing, more details have shown the company’s latest activities, including issuing more shares and, despite not having a closed deal yet, Novo also explained that “the parties continue to work together with the intention of closing the transaction.”
Nevertheless, market speculation has begun, and NVOS stock has experienced an uptick in momentum. Whether or not the new share impacts the float in the near term is to be seen. However, for now, the 10-cent penny stock has been one that traders watched during Thursday’s afternoon session.