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Friday, November 17, 2006

Share Structure

The share structure of the penny stock you are considering purchasing in one of the key factors that you should consider when doing so. This is just how the shares of the stock are distributed throughout the share holders. Now, you may not realize why this is important, until it turns around and hits you. Consider this scenario.

You decide that the penny stock looks good to purchase. So, you go ahead and purchase a good amount of it. It turns out that there are millions of shares of that stock being held by one share holder in an off shore account. The problem with this is what is likely to happen now that you purchased the shares.

You see, if they are not the best of people, as soon as your investing into the penny stock happens, they sell off their stocks.

Why would they do this? It is quite simply because the value of the stock has now gone up. Although there is only two holders of the stock, it is likely that they will decide to sell their shares of the stock and, in the end, your stock value drops a considerable amount. In the end, they have sold the stock and now you are left with something that is not worth nearly as much as it looked like it did in the beginning.

Now, you decide that you would like to turn around and share your stocks. The problem is that the stock prices have rises to the level that makes them too costly with too much risk involved. In the end, you realize that you are stuck with a stock that is not selling. You simply are unlikely to be able to sell it for a profit.

To avoid this problem with penny stock investing, do your homework. Find out what the share structure of the stock is. You will see quickly how this helps you to make good decisions.

· Avoid penny stocks that have a limited share stock in just a few individuals, especially those that are just in one stock holder’s account offshore.

· Second, make sure that the penny stock has a large number of stock holders and that the stock is more spread out. That can help to insure you get the best price for your penny stock all around. Penny stocks should not be single shareholders.

When you take the share structure into account, you are sure to see the benefits that are offered or the risks that play into the stock. You should be able to easily findthis information out as well.