“Emergence of ‘Penny Stocks’ Trend in US Stock Market! Hundreds of ‘Start-up’ Stocks Priced Below $1, Cautioning Taiwanese Central Bank on Investor Awareness”

The Central Bank of Taiwan’s official Facebook page recently posted a message stating that a strange phenomenon has emerged in the US stock market, where many once highly sought-after start-up companies’ stock prices have plummeted below $1, earning them the nickname “penny stocks”. This phenomenon has sparked deep concerns among investors about market trends. The central bank’s Facebook post, known for its sarcastic remarks on the cryptocurrency craze, has once again captured the attention of the cryptocurrency community.

Contents
Toggle
From Stardom to “Penny Stocks”
The Stock Price Crisis and Regulations of NASDAQ
Historical Regulations of NASDAQ and Market Crashes
Consequences of the SPAC Craze
The Reverse Stock Split Strategy
The “Penny Stocks” Phenomenon Worldwide
New Regulations of the Taiwan Stock Exchange and Investor Warnings
Are Cryptocurrencies Also Considered “Penny Stocks”?
What Happens When the Cryptocurrency Market Crashes? It Turns into Memes
The Central Bank of Taiwan states that the stocks of US start-up companies were once highly pursued by investors. However, the destiny of these companies has taken a sharp turn, with many stock prices falling below $1 and becoming so-called “penny stocks”. According to Dow market data, as of December 2023, as many as 557 stocks were priced below $1.

Among them, 464 stocks are listed on the Nasdaq Stock Market. Nasdaq requires stock prices to be maintained at $1 or above, otherwise, companies may face the risk of delisting. Therefore, companies with stock prices below $1 are given a maximum of one year to recover their stock prices.

Since the 1990s, Nasdaq has consistently required listed companies’ stock prices to be no less than $1. However, during previous stock market crashes such as in 2001, 2008, and 2020, this requirement was temporarily waived. In comparison, the New York Stock Exchange has similar regulations, but due to its stricter listing requirements, the number of stocks priced below $1 is relatively low.

Many companies with stock prices below $1 went public between 2020 and 2021. During this period, initial public offerings (IPOs) and mergers with special purpose acquisition companies (SPACs) were very active. However, with regulatory agencies strengthening their supervision in 2021, the SPAC craze gradually faded, leaving behind a group of financially weak entities.

To counter this downward trend, companies like AEye are resorting to reverse stock splits, a controversial strategy often seen as a last resort to meet the minimum price requirement. This strategy has seen significant growth in 2023, as companies strive to combat their declining fate.

The Central Bank of Taiwan states that similar phenomena can also be observed in the Hong Kong and Taiwan markets, where stocks with extremely low prices are referred to as “penny stocks” and “dumpling stocks”. These stocks attract some investors due to their low prices but are also seen as high-risk investment targets.

The Central Bank of Taiwan states that since April 2020, the Taiwan Stock Exchange has implemented new delisting mechanisms. If listed companies fail to resolve their operational problems, they may be forced to delist. This new regulation aims to remind investors of the risks associated with “penny stocks” and “dumpling stocks”.

Investors should carefully consider the risks of investing in these low-priced stocks. In the vast stock market, “penny stocks” may conceal unknown risks, requiring more wisdom and caution to navigate. Remember, investment is not just about seeking low-priced stocks, but also about a deep understanding of company value and market trends.

Due to the numerous similarities between “penny stocks” and cryptocurrencies, some members of the cryptocurrency community believe that the central bank’s comments are meant to be satirical.

The relationship between “penny stocks” and cryptocurrencies can mainly be seen in the following aspects:
High risk, high return: Both “penny stocks” and cryptocurrencies are high-risk investments. Their prices fluctuate greatly, which can lead to high returns or high losses.
Speculative nature: These two investment instruments often attract investors seeking quick profits, as they can experience significant price fluctuations within a short period of time.
Technology-driven: The cryptocurrency market relies heavily on technology, especially blockchain technology. While “penny stocks” may not necessarily be technology-driven, stocks of many companies involved in high-tech or innovative fields tend to have low prices.
Investor groups: Both markets attract a large number of retail investors, especially those dissatisfied with traditional markets such as large stocks or bonds.

In fact, after the popularity of cryptocurrency fundraising, many startups joined the blockchain market due to loose regulations and low transparency, creating a new generation of “penny stock” market.

However, due to the low level of regulation in the cryptocurrency market, many cryptocurrencies that have once hit rock bottom not only avoid delisting but also frequently experience a resurrection, causing significant price rebounds. As long as there is a story, it can attract many speculative investors. This may be one of the major differences from the traditional financial market.

“Penny Stocks”
Taiwan
Central Bank
Dumpling Stocks