Many microcap stocks trade in the "over-the-counter" (OTC) market, rather than on a national securities exchange such as the New York Stock Exchange or NASDAQ.
Microcap stocks tend to be low priced and trade in low volumes. Microcap companies typically have limited assets and operations. The smallest public companies, with market capitalization of less than $50 million, are sometimes referred to as 'nanocap stocks.' This guide will use the term 'microcap stock' to refer to both microcaps and nanocaps. A typical definition would be companies with a market capitalization of less than $250 or $300 million. The term "microcap stock" applies to companies with low or "micro" capitalizations, meaning the total value of the company's stock.
INVESTING IN MICRO CAP STOCKS HOW TO
This Guide tells you about microcap stocks, how to find information, what "red flags" to consider, and where to turn if you run into trouble. Even in the absence of fraud, microcap stocks historically have been more volatile and less liquid than the stock of larger companies.īefore you consider investing in a microcap company, arm yourself first with information. When publicly-available information is scarce, fraudsters can easily spread false information about microcap companies, making profits while creating losses for unsuspecting investors. Many microcap companies do not file financial reports with the SEC, so it's hard for investors to get the facts about the company's management, products, services, and finances. But accurate information about "microcap stocks" - low-priced stocks issued by the smallest of companies - may be difficult to find. Information is the investor's best tool when it comes to investing wisely. Five Questions to Ask Before You Invest.
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