MORE ABOUT NANOCAPS
Nanocap stocks are different from other stocks because they have a small market capitalization and trade on stock exchanges that do not require minimum standards, such as a minimum amount of net assets or a minimum number of stockholders. In addition, these nanocap stock companies often have fewer resources to make their information available to the public. Often, nanocap stock companies will specialize in innovative products or services that may be unknown to the general public.
Nanocap 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 transaction 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.
Executives, Officers, Directors, and Administrators of nanocap companies have significant management liability exposures. Failure to establish cooperate governance standards and a comprehensive risk management/management liability program exposes the personal assets of Executives, Officers, Directors, and Administrators.
Nanocap companies are public to raise capital, to develop products or distribution. Public companies have more sophisticated risk management requirements however it is cost prohibitive for companies of this size to hire in-house risk managers.