What is the term for a stock that trades for less than $5 per share?

A stock that trades for less than $5 per share is commonly called a penny stock.

The label describes a low-priced share, usually associated with small public companies and limited trading liquidity. Many penny stocks trade over the counter rather than on major exchanges, although low-priced shares can also appear on regulated exchanges.

The term can be confusing because definitions differ by context. In broad investing usage, the $5 threshold is common. US securities rules use a narrower regulatory definition and generally focus on securities priced below $5, with additional conditions and exclusions. The SEC also discusses penny stocks in connection with smaller companies and heightened investor risk.

Price alone does not measure a company’s quality or total value. Penny stocks may have wide bid-ask spreads, sparse financial information, and greater susceptibility to sharp price swings or manipulation. “Small cap” instead refers to market capitalization, while “blue chip” describes an established, financially strong company.