Penny stocks are issued by very small corporations to raise money. Usually these companies have very little capital or prospects, and often the sale of stock is the real objective. The stocks are manipulated easier than conventional stocks, in part because these tiny companies are not subject to the same rules of reporting data and financial information like larger corporations are.

The name comes from the fact that most sell for a few pennies- some less than a penny. Most large brokerages do not want to handle them, and most exchanges will not list a stock unless the price is above their minimum standard, often $2 or more. Companies that fall below that minimum will be de-listed from the NYSE, NASDAQ or other large exchange. They wind up on what is called the "Pink Sheet".

Generally- penny stocks are a fool's investment, and a very fast way to lose money.

Penny stocks are pure speculation. Period.