Trading Penny Stocks for Buy Backs
Penny stocks are normally bought at a price in the hope and expectation that a share will rise in value to the point where it can be sold to another investor for a good profit. Sometimes however there are better and more profitable, options. A company will offer shares for sale, effectively selling part of the company, to raise money for expansion, debt servicing, new ventures etc.
When they do this of they also lose a certain degree of control and access to future profits.
If trading conditions for the penny stocks company improve then it may make good business senses for them to buy back, in part in not in full, the part of the company that they had previously sold. This effectively means they regain control over more of the company and any profits accrued.
That said it is a very good indicator of a company's viability if they are buying back their own penny stocks. There is little reason for them to spend money on a share, even if it is their own, that they are not reasonably sure that it will make a profit for them. This is not the same as following a normal investor making a purchase.
If a company is buying back it's own penny stocks then they are doing so on the basis of their knowledge of every financial detail and every projection for future trading. It is a very good indicator that the current trading price is to low, or that is about tom increase.
No board of directors would buy penny stocks of a company; even their own, if they thought it was going to do badly, or the share price was going to fall. If you can buy when the company is buying then this is often a very good investment.
The bought back penny stocks are often then "retired", meaning discontinued, by the company. This effectively means that the company contains fewer shareholders for the same value and effectively increases the value of your penny stocks. Eventually the company may intend to buy back all of the penny stocks and return to being a private business again.
When looking at this option in the penny stocks market it is advisable to check back through the company's accounts. If they have been buying back their own shares over a reasonable length of time then it is possible, if not probable, that this will continue.
This will usually have the effect of increasing the value if the penny stocks that you own. It also gives you a good way to take any profits buy offering to sell back to the company. After all they are not just another investor trying to get the best deal. They are only buying particular penny stocks, the very one that you own.
Although this may put in a good negotiating position with the penny stocks company don’t forget that there are probably many other investors who maybe willing to sell for the right price. Know the value of the penny stocks and accept a reasonable offer, instead of losing out on what maybe a very good deal, just to try and get the last few cents from it.
If you sell your penny stocks as part of a "buy back", you may not get all the money at once. Many companies plan "buy backs" to a schedule very often over several months or longer so although you know you have a good buyer you may have to have a little patience. Selling penny stocks back to the company is usually one of the more reliable ways of making a profit though, as with all trading, it pays well to do your research first.
Click here for more penny stocks details.