stock trading FAQ's

How Is a Penny Stock Created?

Small companies and startups typically issue stock as a means of raising capital to grow the business. Although the process is lengthy, issuing stock is often one of the quickest and most effective ways for a startup company to obtain capital.

A penny stock, like any other publicly traded stock, is created through a process called an initial public offering or IPO. To be listed on the OTCBB the company must first file a registration statement with the SEC or file stating the offering qualifies for an exemption from registration. It must also check state securities laws in the locations it plans to sell the stock. Once approved, the company may begin the process of soliciting orders from investors.

Finally, the company can apply to have the stock listed on a larger exchange, or it can trade on the over-the-counter market.

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