"Stock Market Sees Trend of 'Penny Stock' in US! Hundreds of 'Startup' Stocks Priced at Less Than $1, Taiwan Central Bank Cautions Investors"

The official Facebook page of the Central Bank of Taiwan posted a message indicating that a peculiar phenomenon has emerged in the U.S. stock market recently, where many once high-flying startup company stocks have plummeted to below $1, jokingly referred to as "egg and dumpling stocks." This occurrence has sparked deep interest among investors in market trends. The central bank's social media post, known for its tendency to mock cryptocurrency trends, has once again captured the attention of the cryptocurrency community.

From Shining Stars to "Penny Stocks": The Transformation

The Central Bank of Taiwan stated that stocks of U.S. startups were once a sought-after target for investors. However, the fate of these companies took a turn for the worse, with many stock prices falling below $1, becoming so-called "penny stocks." According to Dow Jones market data, as of December 2023, as many as 557 stocks were priced below $1.

Nasdaq's Stock Price Crisis and Regulations

Among them, 464 stocks were listed on the Nasdaq stock exchange. Nasdaq mandates that stock prices must remain above $1, or companies may face the threat of delisting. Companies with prices below $1 are given up to one year to regain compliance.

Nasdaq's Historical Regulations and Market Crashes

Since the 1990s, Nasdaq has consistently required listed companies to maintain a stock price of at least $1. However, during past market crashes in 2001, 2008, and 2020, this rule was temporarily suspended. In comparison, the New York Stock Exchange has similar regulations, but due to stricter listing requirements, there are fewer stocks priced below $1.

Consequences of the SPAC Boom

Many companies with stock prices below $1 went public between 2020 and 2021. During this period, initial public offerings (IPOs) and mergers with Special Purpose Acquisition Companies (SPACs) were active. However, as regulatory bodies strengthened oversight in 2021, the SPAC frenzy gradually subsided, leaving behind financially weakened entities.

Reverse Stock Split Strategy

To combat this downward trend, companies like AEye are resorting to reverse stock splits, a controversial move often seen as a last resort to meet the minimum price requirement. This strategy saw a significant increase in 2023 as companies strive to address their declining fortunes.

"Penny Stocks" Phenomenon Worldwide

The Central Bank of Taiwan noted that similar phenomena exist in the Hong Kong and Taiwan markets, where stocks with extremely low prices are referred to as "penny stocks" or "egg and water dumpling stocks." These stocks, due to their low prices, attract some investors but are also often considered high-risk investments.

New Regulations by the Taiwan Stock Exchange and Investor Alerts

Since April 2020, the Taiwan Stock Exchange has implemented a new delisting mechanism. Companies that fail to address their operational issues may face delisting. This new regulation aims to alert investors to the risks associated with "egg and water dumpling stocks."

Investors should carefully consider the risks of investing in these low-priced stocks. Within the vast stock market, "egg and water dumpling stocks" may harbor unknown pitfalls, requiring more wisdom and caution to navigate. Remember, investing is not just about finding low-priced stocks but also about understanding company value and market trends deeply.

Are Cryptocurrencies also "Penny Stocks"?

Due to the many similarities between "penny stocks" and cryptocurrencies, some in the crypto community see the Central Bank's comments as ironic.

The relationship between "penny stocks" and cryptocurrencies is mainly reflected in several aspects:

• High Risk, High Reward: Both "penny stocks" and cryptocurrencies are high-risk investments. Their prices fluctuate significantly, leading to either high returns or high losses.
• Speculative Nature: These investment tools often attract investors seeking quick profits, as they can experience significant price fluctuations in a short period.
• Technology-Driven: The cryptocurrency market heavily relies on technology, especially blockchain. While "penny stocks" may not always be technology-driven, stocks of companies involved in high-tech or innovative fields often have low prices.
• Investor Base: Both markets attract a large number of retail investors, especially those dissatisfied with traditional markets like large stocks or bonds.

In fact, with the rise of cryptocurrency fundraising, many startups joined the blockchain space due to loose regulations and low transparency, creating a new generation of "penny stock" market.

What Happens in Crypto When it Hits Zero? It's All About Revival Myths

However, due to the lightly regulated nature of the cryptocurrency market, many coins that have once hit zero not only avoid delisting but often experience revival myths, with significant price rebounds. As long as there's a story, it can attract many speculators to join in. This may be a stark difference from traditional financial markets.