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The term microcap stock (also micro-cap) refers to the stock of public companies in the United States which have a market capitalization of roughly $50 million to $300 million. The shares of companies with a market capitalization of less than $50 million are typically referred to as nano-cap stocks.
Many micro-cap and nano-cap stocks are traded over-the-counter with their prices quoted on the OTCBB, OTC Link LLC, or the Pink Sheets. The larger, more established microcaps are listed on the NASDAQ Capital Market or American Stock Exchange (AMEX).
Micro-cap and especially nano-cap stocks can sometimes experience volatility. Some of these companies fail to execute their business plans and go out of business. Fraud and market manipulation are not uncommon and the transactions costs in trading can be quite high. Pricing is more likely to be inefficient, since fewer institutional investors and analysts operate in this space, due to the relatively small dollar amounts involved and the lack of liquidity.
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