Interactive brokers alows shorting stocks under $1.00
Just one a few I found within 3 mins. By Timothy Sykes Recommended Brokers For Shorting Penny Stocks (Yes, It's Legal & A Good Niche Strategy)
I get this question sooooo much, it's time I had my own forum post about it...because I short sell hard-to-borrow penny stocks. Yes, it's legal, you can short stocks under $10, under $5, under $3, even under $1 (although I hate shorting stocks under $1/share due to upside risk)...just gotta find brokers that have shares to short.
I know this is a strange strategy to many people, but its help me turn $12k into $2 million in 4 years (1999-2002), become the #1 ranked short bias hedge fund (2003-2006) and now the #1 ranked trader out of 40,000+ on Covestor (2007-2009)...learn the strategy at http://www.timothysykes.com
I use and recommend Thinkorswim (I'm also an affiliate because I love em the most out of any broker...they had shares to short of true carcass companies (whose stocks surged due to promotional mailers and emails being sent out) like AENY &EMGE and their customer service is tops. I also use Interactive Brokers & Sogotrade
as they sometimes have shares to short of these stocks too, but both customer services aren't up to Thinkorswim standards...and as I write this, I am not their affiliates because neither of them will even get back to me about joining their affiliate programs!
Here are some basic posts I and others have written to help you learn how to short sell horrific penny stocks: