More & More & More Problem(s) with Penny Stocks.
Lack of Information
Similar to problems with liquidity, a lot of Penny Stocks do not have or make available information for investors to analyze.
Penny Stock companies usually don’t have the resources to have a team of employees who are dedicated to addressing concerns expressed by their shareholders (Investor Relations departments). They also likely have small budgets – if any budget at all – dedicated to making regular press releases to keep the public informed of their business activity (Public Relations departments).
So as you are doing your research on a potential company, you’ll typically find a dead end in a short amount of time with a Penny Stock. You won’t have as much information to analyze as you would for a mega-cap comany that has a bunch of institutions providing coverage of it. With a Penny Stock, you typically only have its price history, regulatory filings, and a small amount of sporadic press releases to review and draw conclusions from.