What is a Nano Cap Stock?

A nano cap stock is a stock with a market capitalization of less than $50 million dollars.  While some industry firms such as market markers, venture capital, investor relations firms and other wall street firms have different definitions and some companies bunch nano cap companies with micro cap companies (firms with market capitalizations under $300 million. 

A nano-cap stock has very similar features to micro cap companies in that they at normally thinly traded and trade on smaller stock exchanges or over the counter on the OTCBB or the OTC Markets Inc. 

A nano cap stock with a market capitalization does not necessarily mean that the stock is a penny stock.  As we have discussed before, the market capitalization of a company does not decide whether or not it is a penny stock.  It thus follows that a nano cap stock can be priced at any dollar amount.  It should be noted that many nano cap stocks are in fact penny stocks. 

Nano cap stocks are considered extremely risky and have been subject manipulation by stock promoters and pump and dump schemes.  These stocks are among the riskiest stocks that can be purchased. While their are inherent risks in trading nano cap stocks, their are also some advantages.  Most mutual funds and institutional investors are prohibited from buying stocks under a certain market capitalization.  This means nano cap stocks leave speculators and smaller cap investors the opportunity to beat some of these fund investors.