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Tuesday, March 19, 2024 8:59:01 AM
Potential for Fraud
Unfortunately, low-priced securities also can be more susceptible to fraud. Scammers might take advantage of some of the lesser listing and disclosure standards to misrepresent key facts about the company. They might exaggerate—or even invent—its products or capabilities, perhaps capitalizing on current events or market trends to appeal to investors.
The potential combination of minimal information and low trading volume can also make it easier for bad actors to manipulate a stock’s price to their advantage. Low-priced securities can be a target for pump and dump and similar schemes in which fraudsters artificially inflate the price of a security and then quickly sell their shares, leaving investors facing losses.
https://www.finra.org/investors/insights/low-priced-stocks-big-problems
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