What are penny stocks? The standard definition says they are shares of companies trading under $5. But throughout history, traders have made their own definitions for penny stocks. Some say they’re stocks under $2, and others say that they should be stocks trading for pennies. No matter how you define penny stocks, there’s one thing in common for anyone looking to buy them. That one thing is they are looking for ways to make money with them.
If you’re new to these cheap stocks, something to understand is that share price is one of the first things to consider when weighing risk and reward. Generally speaking, the lower the price, the higher the chances of stocks experiencing big swings in position value. For example, a $4 “penny stock” that rises $0.40 just saw its value increase by 10%.
But the $0.50 stock that rises 40 cents just saw its value nearly double. The same scenarios hold when prices drop. You start to understand that outside of overall market factors, price alone can become a huge driver of risk.Penny Stocks Under $1
Different platforms, like Robinhood and Webull, restrict access to certain penny stocks. In these cases, platforms like those only allow customers to buy penny stocks listed on the major exchanges – Nasdaq & NYSE. As far as OTC penny stocks, there are very few instances where certain ones have been accessible. This is important because, realistically, penny stocks under $1 on major exchanges are at risk of being delisted.
Companies are required to have a minimum bid price of $1 to maintain a listing. If they trade for too long below $1, the exchange can choose not to list the company’s shares. This is one of the reasons why penny stocks under $1 on Robinhood may be so sparse. Does that mean they don’t exist? No, & here’s a list of a few names that were still below that $1 threshold as of Friday’s closing bell. Just because they’re “cheap,” are they worth the risk?
- Northern Dynasty Minerals Ltd. (NYSE: NAK)
- Synthetic Biologics Inc. (NYSE: SYN)
- China SXT Pharmaceuticals (NASDAQ: SXTC)
Shares of Northern Dynasty Minerals have traded below $1 for the better part of the last 3 months. Late last year, questions arose regarding the company’s management and, more importantly, the future of its Pebble project in Alaska. The US Army Corps of Engineers ended up issuing a negative Record of Decision for the proposed copper-gold-molybdenum-silver-rhenium mine. But shortly after, Northern submitted its appeal to the decision. Since then, the market’s focus has been on what happens next.
An update late last month suggested that certain parts of the US Army Corps’ decision went against the law. Northern Dynasty’s appeal also expressed that the decision was fundamentally unsupported by Alaska’s administrative record, including the Pebble Project EIS. This was when the clock started ticking, which has become a center point of focus for speculation in the market.
The USACE has 30 days from receipt to notify the Pebble Partnership as to whether its RFA is complete. USACE guidelines indicate the administrative appeal process should conclude within 90 days, although it may be extended under certain circumstances.Northern Dynasty, January 21,2021 Press Release
Considering the fact that NAK stock is trading near that $1 threshold, will it remain as one of the sub-$1 penny stocks this week?Synthetic Biologics Inc. (SYN)
You might recall Synthetic Biologics from a few articles we’ve released, mentioning the company. Synthetic is a biotech company with a particular focus on microbiome therapeutics for gastrointestinal (GI) diseases. Its SYN-004 is currently in Phase 1b/2a clinical trials for use in allogeneic hematopoietic cell transplant recipients.
This year, Synthetic received approval from the Institutional Review Board at Washington University School of Medicine in St. Louis to begin these trials. The company can now begin patient enrollment. Elaborating on the progress, Synthetic CEO Steven A. Shallcross explained, “Approval of the Phase 1b/2a clinical protocol by Washington University’s IRB is an important step in pursuing a potentially more cost-effective development strategy for SYN-004, targeting a highly specialized patient population.”
In light of recent interest in small-cap biotech stocks, the market has speculated on further updates to this trial’s progress. No new announcements have been made concerning its pipeline. However, recent filings reveal a few things. These include growing institutional interest from the likes of Renaissance Technologies LLC and Hudson Bay Capital Management. The company also filed a document that showed it might be looking to raise upward of $30 million. Will this pose a potential dilution risk for the company in the short term?China SXT Pharmaceuticals (SXTC)
Shares of China SXT had also been climbing for the better part of the last few months. The company is based in China and focuses on R&D, manufacturing, and traditional Chinese medicine sales. News has been sporadic at best, but several things have come up that’ve caught the market’s attention. The most recent came in an update last week.
China SXT announced a non-binding letter of intent with Jiangsu Renji Pharmaceutical Chain Co., Ltd. The company will acquire 70% interest in Renji Chain. The two still have to negotiate and agree on the final amount upon completing Renji Chain’s audit. However, as this transaction proceeds, China SXT said it would publicly disclose required information either through press releases or SEC filings, as appropriate.
One of Renji Chain’s highlights is that it’s a pharmaceutical retail chain with a national online drug sales license. According to the company, it’s also the largest retail chain integrating pharmaceutical marketing and Taizhou service. While the market awaits further updates, it may be worth it to keep an eye not only on the SXTC newsfeed but on its filings as well.
As far as other points of interest, SXTC has also filed a shelf. Earlier this month, China SXT published a filing showing it may raise up to $40 million. Similar to Synthetic, will this pose a potential risk of dilution?