Investor-protection advocates say many belong to risky small companies that should be on the OTC market.
With 557 names listed, the real problem, too many to choose from!
(Note, we asked Co-pilot for a list of all stocks trading under $1.00 and trading under cash, and nothing came back. We’ll keep trying.)
Hundreds of stocks have broken the buck this year, following a slump in the once-hot market for buzzy startups seeking rapid growth.
As of Friday, 557 stocks listed on U.S. exchanges were trading below $1 a share, up from fewer than a dozen in early 2021, according to Dow Jones Market Data. The majority of these stocks—464 of them—are listed on the Nasdaq Stock Market, whose rules require companies to maintain a minimum share price of $1 or risk being delisted.
Investor-protection advocates say many of these sub-$1 stocks belong to risky small companies that should be on the over-the-counter market, the traditional home of “penny stocks” not ready for the prime time of Nasdaq or the New York Stock Exchange.
But instead of being delisted, the companies are maneuvering to maintain their Nasdaq spots—alongside blue chips such as Apple and Microsoft—as long as they can.
Many of today’s sub-$1 stocks went public in 2020 and 2021 during a boom in initial public offerings and deals with special-purpose acquisition companies. Mergers with SPACs were a popular way for startups to go public until a regulatory crackdown in 2021 slowed the SPAC craze.
Nasdaq’s website lists 583 companies that are “noncompliant” with its own listing rules. Besides falling below $1 a share, common reasons for companies to become noncompliant include failing to meet minimum targets for float, stockholders’ equity or number of shareholders.
Reverse stock splits have surged as struggling companies seek to boost their share price above $1. There have been 255 reverse splits so far in 2023, up from 159 last year, according to data provider Wall Street Horizon
BARGAINS IN THE IPO RAVAGE?