Michael Burnbaum :penny stock faces the lack of institutional support .
One of the hurdles a penny stock faces is the lack of institutional support. This means that these stocks are not on institutions' radar screens as buy candidates. This is important because institutional sponsorship is what typically moves a stock price higher.
A misconception is that after a stock has made a tremendous move and undergone numerous stock splits, it will be quoted as selling for pennies on a split adjusted basis 10 year before. This is not completely accurate as the stock may not have ever been available to the public at this price, but only appears this way when looked at in the rearview mirror.
Another challenge for a penny stock investor is to find any meaningful information about the company. Penny stocks or microcap stocks as they are referred to in the financial world are listed on the OTCBB exchange or in the Pink Sheets.
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