How To Tell If A Penny Stock Is Legit
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jamesgood Goblin Worker   Posts: 1 Joined: Dec 2021 Reputation: 0 |
26 Dec 2021, 11:23
There’s no question about it penny stocks can bring home some of the biggest gains despite being in the gutter of Wall Street. But those tiny companies can also bring along quite a bit of risk. you’re investing in a business with serious profit potential or a scamster’s shell game. One of the biggest questions asked at on stock forums is: "Can you tell me if XYZ Corp. is legit?" And while we can’t give out personalized investment advice, we can give you the tools to determine whether you’re investing in a business with serious profit potential or a Phone Number List shell game. For many investors, the idea that a stock could be representing itself incorrectly is unthinkable. After all, we’ve got the SEC, the exchanges – like NYSE and NASDAQ – and independent auditors taking a look at every filing that a company puts out to shareholders. But in the world of micro-cap stocks, many of those same protections just aren’t there. Since the Securitie Phone Number Lists and Exchange Commission was created there have been countless scandals over the last couple of years have shown us that they simply doesn’t have the resources to make sure that the smallest companies are reporting accurately. Serious listing requirements for penny stocks ensure that shares trading on major exchanges are legitimate Phone Number List businesses, but for stocks that trade OTC or on the Pink Sheets, the requirements to get shares trading are slim to none. And while most investors think of audited financials as a safeguard that keeps a company’s financials accurate, many companies also aren’t required to get their books audited because of their size. If you’re thinking about investing in a penny stock that’s exempt from registering with the SEC might still be looking at a perfectly good investment… but you have to do your homework.
Verify the Business The first step to determining whether a penny share is legitimate is to verify that the business exists and does what you think it does. You can start off by entering the stock’s ticker on a major financial site – like Google Finance – and checking out the description of the company. Those descriptions come from Phone Number List from filings, so you can generally trust what they say since thanks to the Sarbanes-Oxley Act, it’s a felony for management to lie on company filings. Also, log onto the SEC’s website and look for company filings to get the full look at a company’s operations. And don’t forget to look at its ticker… an "E" at the end means that the company is delinquent in Phone Number List providing its regulatory filings – a very big red flag. For companies small enough to not report their financials, ask your broker for a copy of the company’s "Rule 15c2-11 file". In it, you’ll find a slew of information that the company was required to provide to prove their exempt status. Check the Auditor When you’re reading a company’s financials, look for the audit opinion (generally near the end of a 10-K annual report filing). It’s a statement from the independent auditors that explains the Phone Number List steps an auditor took to verify a company’s financials as well as whether the financials are accurate in their opinion. Checking who the auditor is makes a big difference too. Bernie Madoff’s "independent" auditor was neither – he trusted Madoff too, blindly signing off on the scamster’s financials and losing millions of his own in the process. Checking into the accountant’s CPA firm Phone Number List would have showed that it was a tiny storefront with only one CPA and without the manpower to audit a multi-billion dollar financial firm. Getting audited by one of the "big four" accounting firms – PricewaterhouseCoopers, Deloitte, KPMG, and Ernst & Young – is generally the domain of big blue chips that can afford to have prestigious accounting firms handle the audit, so don’t stress if the auditor’s name doesn’t look familiar. Take the time to research who the auditor is, though, and whether they’re qualified to handle a company audit. A quick Google search Phone Number List should solve that. Give Them a Call Hard-to-find contact information is another red flag that should be watched out for. Since most companies are constantly on the lookout for new business, their sales team should at least be easily accessible. If you have concerns about whether or not the company is legit, go ahead and call the phone number on their website. If you can’t find a number or address, check back on the SEC website – companies have to include their corporate contact Phone Number List information on the cover of all 10-K and 10-Q filings. New technology has also made it much easier to verify a business’s contact information. Just type in a company’s address into Google Maps, and select "Street View", and you can actually see the building Phone Number List where its offices are located. If the offices for a publicly traded stock are showing up as someone’s home or a mailbox rental store, be very wary of going forward. |
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vostov Riggedy-riggedy-rekt Warlock Posts: 1,131,787 Joined: Apr 2020 Reputation: 0 |
24 Mar 2024, 12:55
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