Just in the last two weeks,,,3 stocks in my radar and one stock that i have small trading position is going bankrupt and shares to be delisted and 'worthless' and to be traded in the pinksheets and is trading in the pinksheets. these are penny stocks..these companies had revenues over 100 million just 3 years ago..either bad management or banks are not financing companies...either way all 3 used to have market cap of over 200 million and less than 10 years as a public company. moral: unless companies can prove themselves over 10 years,,,it's a risky bet in stocks. a company that cannot generate consistent positive cashflow is worthless and has no equity. most of these companies that always issue ipos or borrow money are parasitic companies. also a lot of these companies main purpose was to be created and sold to investors and than close shop. in other words they are not long term investments or some hedge fund 'hijacked' the company. anyways stocks are risky and the risk of bankruptcy always there. the dangers of trading and investing. most of the time my gut instinct of fraud is always right and the stock market has proven me right again. the market makers they are okay market makers don't have a position in the stock they trade,,it's the management and backroom dealings that is where all the fraud takes place. dark pools etc.
Yep, there is always a risk with ANY stock, regardless of its prior history. From virtually unknown penny stocks to to the 100+ year old Lehman, etc. The value of any stock isn't really measured by "book value" or "forward p/e ratio" or the crap mentioned on CNBC or in a company's financials. It's only worth what someone is willing to pay for it.
I know Tim Sykes is not a popular guy around here, but he puts out some interesting info about penny stocks and how that game works. Just recently he researched a company that was operating out of a barn as an example... Doing extra research is required when playing with companies that are trading for pennies as there is typically a reason they are priced that way.