From the "Triple 000 and Sub-penny Chart Plays" board, originally from Penny Stock Nation...
What is so dangerous about Trip-Zero's?
Selling is the hard part...
So you might be thinking, "What's so hazardous about a .0001 stock? It can't go any lower." Well.. that's not really true. First of all, if the stock has no bid and you buy at the ask of .0001, you've immediately assumed a 100% loss. Why? Because, with no bid, you couldn't even sell the stock readily if you wanted to. Remember, you can't sell it for less than .0001. So, to simply get out of your position even, you'd have to put your sell in at .0001, and hope your shares are bought up by someone else. Now the issue with this is you are now at the very back of a long line of people trying to sell shares for .0001. That's the way the market works. Orders sent to a particular market maker get filled first come, first serve, and if you're at the back of a long line, you are going to be waiting until the last of the shares offered at .0001 - yours - are bought. Once in a while you might get lucky depending on what market maker your broker uses. Say you use E*TRADE, which has its own Market Maker (ETMM), and you are the only one trying to sell shares through ETMM at .0001. If a fellow Etrader comes along and decides to buy shares, they will most likely match your orders and you'll get filled before the line of people waiting behind NITE or AUTO. Chances are, your market maker already has a bunch of orders queued, but every now and then this might work to your advantage.
Beware of the Reverse Split
There is yet another way your .0001 investment could dwindle to oblivion. If a company can no longer drive demand for their stock, and cannot get it off the metaphorical .0001 "floor", their only recourse is the dreaded Reverse Split. A Reverse Split, or RS, if you don't know already, reduces the number of shares outstanding while simultaneously raising the share price at the same ratio. If they enacted a 100:1 RS, and you had a million shares at .0001, you would be left with ten thousand shares at a price of .01. The share price goes up, (to dilutable levels…) but you are left with fewer shares. The problem with reverse splits is they are seen as the worst possible event in the penny stock world, and almost always lead to a massive selloff when they're announced, and then often once they are executed. In the aftermath the stock you own that started off at .01 post split, might settle at .0035 or so. You're left holding onto a 65% loss, but the company is left with 35 ticks of share price to dilute… Trip-zero stocks have the highest risk of reverse splits because it is usually the company's only option to continue 'utilizing' the stock, and most trip-zero stocks didn't get there from solid management and profitable business plans. Many are scams and dilution schemes that will dilute to oblivion, reverse split, rinse and repeat.
