This is the name typically given to the shares of small high risk firms.

Sometimes their share price may only be a few pence – hence the name – but this isn’t a requirement to be classified as a penny share. As a rule of thumb if the bid to offer spread (the gap between the buying and selling price for the share) is 10% or more and the share price is less than 50p the label penny stock is often used. Investors should note that these shares are often difficult to trade and highly volatile.

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