<p><strong>Penny <a href="/NewSite/encyclopedia/stock/" class="ency-link">Stock</a></strong> refers to stocks trading at a very low price, usually under $5 per share. These stocks are often issued by small companies seeking capital to expand their businesses.</p>
<p>Penny stocks matter to investors seeking high potential returns, as even a small increase in price can result in significant gains. However, they are highly speculative and risky due to the companies' small size and lack of established track record. For instance, a $0.50 stock rising to $1 would yield a 100% return, but it could also drop to zero if the company fails.</p>