Glossary
Micro-cap stock
A stock of a very small company, commonly $50 million to $300 million in market value, often thinly traded and volatile.
On this page
A micro-cap stock is the share of a very small public company, by a common rule of thumb worth roughly $50 million to $300 million in total market value; companies below that are sometimes called nano-caps. The group includes young companies with real promise and old ones in decline, and it is also where the SEC sees a large share of stock-promotion fraud. Micro-caps can move enormous percentages in a day, in either direction.
How micro-caps differ
- Thin trading. Daily volume may be a few thousand shares, so a modest order can move the price several percent and bid-ask spreads are wide.
- Less information. Few or no analysts follow them. Many micro-caps trade over the counter rather than on an exchange, and some OTC issuers file little or nothing with the SEC.
- Higher failure rates. Many have little revenue, rely on raising new money, and dilute existing holders by issuing shares.
What to watch for
Pump-and-dump schemes often target micro-caps: promoters push a story through social media, newsletters or messages, the price spikes, and insiders sell into the buying. Warning signs include unsolicited tips, sudden heavy promotion, very large share-count increases and frequent name or business changes. Check whether the company files current reports with the SEC before relying on any figure about it.