Call your brokerage, and ask them if you can short penny stocks. The answer will be no. If you look hard enough, you will find it on your broker's home page. Not easy to find, but it's easy to call them.
I found Etrade's rules which DO say they won't take short sales on penny stocks. But more importantly, it doesn't make financial sense.
Penny stocks rise and fall constantly. Putting up thousands of dollars in the hopes of making 10's of dollars simply makes no sense.
Just buy the fricking stock and sell it when it rises instead of risking your whole portfolio by gambling that it will drop.
Let's say you wanted to short 1,000,000 shares of HPIL. You would have to put up $2.50 per share as margin. That would cost you $2,500,000 JUST for the margin. And if the stock goes up, you are screwed because now you have to buy it at the higher price. So, you lost money.
Now, at $.01 per share, and betting it would drop 10%, you could make, at most, 1,000,000 X .009 = $9000. Again, you put up 2.5 MILLION in margin to make, at best, $9000.
Not that your brokerage would permit it, but you can see why a brokerage would not get involved with that.
Use that 2.5M to buy the stock. You could buy 250 million shares. Let it go up one click, to .011 and make $250K...If it drops, just hold it until it DOES go up. Nothing lost unless sold at a loss.
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