Even though meet kevin and graham stefan are in the title of this video i promise you that i am not going to talk negatively about these two i'm going to use them as an example because in this video i'm going to talk to you about the difference between micro cap stocks and penny stocks and the reason why i put meet kevin and graham stefan in the.
Title is because i'm trying to become a better youtuber you see this year i stepped up my youtube videos starting in january and i took a course graham stefan youtube course and i am taking some of the the tips from him so for example i improved my thumbnails i improved my description i improved my titles and in the titles if i put graham.
Stefan and meet kevin i'm going to get more clicks and also graham stefan said that if you want to get more clicks you want to talk about somebody you want to gossip about somebody else who is better to gossip about or to use them as an example if it's not graham stefan or meet cavett of course if you're new to this channel my name is mario skonichne.
I run microcap explosions a website dedicated to microcap stocks which are ignored and underfollowed by the investment industry i also wrote about 10 books on investing one of which is available for a free download at microcapexplosions.com i also created valueinvestinguniversity.com.
Which is a free not paid a resource to make you a more intelligent investor what's the difference between microcap stocks and penny stocks you see this is so typical for people to not to understand the difference and why am i talking about it because when meet kevin.
Canceled our 20-minute coaching session he wrote me this wonderful email saying that he's not interested in doing doing this session because he's not interested in pumping and dumping microcap stocks and in the same email he used the term penny stock so it made me think that if somebody like meet kevin doesn't understand the difference between micro.
Cap stocks and penny stocks and many others don't understand the difference so that's why i'm making this video so when we are talking about micro cap at the end of micro is a cap which is cap which stands for market capitalization in other words equity in the company so when you have a market cap its number of shares times.
The price per share that gives you the market cap and and companies can be categorized in different market caps you have micro caps small caps mid caps large caps and different people might have different definitions exactly what exactly where the category ends and where the new one starts but i always like to say that.
Micro cap companies are companies that have market caps of less than a hundred million dollars okay that's what makes it a micro cap now micro cap might be a penny stock but it might not be a penny stock penny stock is a definition that has to do with the price of a stock one particular stock so if a stock of a.
Company is trading for five dollars or less it's considered a penny stock it's weird it should be less than one dollar but the definition is less than five dollars is considered a penny stock so let me give you some examples berkshire hathaway for example berkshire hathaway one stock the a stock is almost half a million dollars the market cap is about.
700 billion so clearly berkshire hathaway is not a micro cap it's a large cap or a huge cap whatever you want to call it and it clearly is not a penny stock because one stock is half a million dollars right if you look at a company like oracle with the ticker symbol oco the market cap is over 200 million yet the stock price in canadian.
Dollars is about 1.30 as of the time that i'm recording this so oracle is not a micro cap anymore because the market cap is over 100 million but because the price of a stock is less than five dollars it is a penny stock right and when i first discovered uh oracle in 2017 the stock price was at four cents the market cap was three million so at.
That time oracle was both a micro cap and a penny stock and as the stock price and market cap appreciated oroco lost its status as a micro cap it became a small cap but because the stock price is still less than five dollars it is still a penny stock if we use an example of voxter voxter went through a similar situation when i found voxter first it.
Was both a microcap and a penny stock today vaxter has a market cap of close to 500 million yet the stock price is trading for now less than a dollar therefore it is not a micro cap from the market capitalization but it is still a penny stock now as you know because i've talked about it voxter is looking to app list to tsx toronto stock exchange which.
Is a level up from tsxv v standing for toronto stack exchange venture and when it does so and also when it uplifts to nasdaq later this year and when they do a reverse split up to 20 times the stock can trade anything nothing changes it could trade as as high as 20 like based on that transition or if they do a less it might trade you know at 10.
Because in order for vaxter to qualify to apples to nasdaq the stock price has to be over five dollars because nasdaq doesn't want any penny stocks right so at that point vaxter will become will lose its status as a penny stock and it already lost its status as a micro cap stocks right now it's still a small cap or mid cap whatever and it is a penny.
Stock but when it does the reverse split it will not be a penny stock anymore and it will not be a micro cap stock because it's not a micro cap stock of course assuming the stock won't go down anymore right and then you see when that happens you see a lot of things will change because in the minds of investors in the minds of people when they see a stock.
Price of more than five dollars you know they're not afraid anymore because people are afraid and petrified of penny stocks but that simple reverse split will make it be less terrifying to look at voxter simply because of the stock price the value will not change the market cap will not change simply because it will have a stock price.
Higher than five dollars it will automatically become a different category and more people will look at it because they're not going to be terrified if you look at a stock like secure for example that company because it has a market cap of about 30 million and a stock of about 30 cents it's both a micro cap and and a penny stock right.
It it fits those categories if the market cap surpasses a hundred million then it will not be a micro cap anymore and if the stock price goes over five dollars then it will not be a penny stock anymore but as of now secure is both a micro cap and a penny stock let's use another example of a company that was actually included in the.
Wonderful book how to profit from coronavirus recession licht corporation they provide internet and phone services in rural areas and their stock price today is about 22 000 for one share the market cap is about 400 million so today it is not a penny stock and it is not a micro cap stock but you know what about 10 years ago the.
Stock price of leaked corporation was only 3 000 i said only was 3 000 and the market cap was less than 100 million so even though even though the stock price was three thousand dollars definitely not a penny stock it was a micro cap and micro cap that people like meet kevin for example don't understand the difference they think it's all the same.
They think that a micro cap is a penny stock and a penny stock is a micro cap right but licked corporation had a stock price of 3 000 10 years ago and a market cap of less than 100 million therefore it was not a penny stock but it was a micro cap stock now let's use examples of companies that for example meet kevin was talking about on his youtube channel.
And i featured in my video when i said don't cancel kevin one of them was shift technologies which is a company that you know does use cars sales and buys online and this was a company that was both a regular stock so it wasn't a penny stock it was not a microcap stock when he was talking about it it was it was a it was a small.
Cap and now after this huge decline shift technologies became both penny stock and a micro cap stock so again when the stock was high and he was talking about it it was a small cap and it wasn't a penny stock after it declined hugely it became a penny stock and a microcap stock if you look at another company that he was talking.
About rcimodo which has these electric toys electric little vehicles it was also a small cap stock and another penny stock but now that it declines so much now the stock is a penny stock but it is not a micro cap stock because it has a market cap more than a hundred million you see the difference and then there is something called micro cap exchanges i.
Mean i make up this name microcap exchanges secondary exchanges that a lot of microcap stocks and penny stocks trade on and they are otc over the market toronto stock exchange venture and canadian stock exchange cse aim in london and then i don't remember the one in australia but those are secondary exchanges that are track micro cap and.
Penny stocks right and actually otc is not really an exchange it's a quotation system but you know from our point of view the way you buy those stocks you can't even see the difference so let's just for now call it an exchange and now just because something is a secondary exchange or you can call it penny stock exchange or.
Micro cap exchange doesn't mean that all the companies that trade there are penny stocks and are micro cap stocks because for example again going back to vaxter voxter trades on tsx venture vaxter is not a micro cap anymore because it has a bigger market cap that's why voxter is moving out of there because it needs to be on a better.
Exchange oracle the same thing it's not it's not a micro cap anymore yet it's still trending on the exchange oracle if you wanted to it could uplift to tsx venture the main board but for some reason they're not doing it they're staying on that exchange another great example is otc group that also was included in this.
Fantastic book on coronavirus otc group if you look at the chart over the you know many years it it delivered a 10x performance today otc is a 60 stock and a market cap of 700 million so you can see that otc what is otc group otc group is the company that owns and manages the otc market like all of those penny stocks that trade under quotation.
System otc group owns it an otc group happens to be a publicly traded company so of course otc could very well be listed on new york stock exchange it could be listed on nasdaq but since otc is about otc it might as well trade on otc right so this is an example of a company that is a not a micro cap is mid cap and yet it's.
Still trading on otc which you know people think it's the whole thing it's you know dangerous and you shouldn't go and i agree with this 80 to 90 percent of the companies that trade on those exchanges are uninvestible you and i want to focus on the 10 to 20 and definitely otc group belongs in that quality companies that even though they.
Trade on those micro capo penny stock exchanges they're fantastic companies and obviously they deliver fantastic results for their shareholders why because the business is strong and now this brings me to graham and meet kevin again because you see i know that graham knows that i wanted to be on the ice coffee hour a podcast okay i know that.
He he watched some of my videos and then he doesn't want to have me because he have probably probably he has the same impression that kevin had when he looked at my videos and he looked at my youtube channel he's a pump and dumper focused on micro caps and penny stocks so it's clear to me that well first of all i understand they don't.
Have the time to look at me and analyze what i am about so they just put me in the same category of penny stock promoter now what i find interesting about it is because if they understood the difference between microcap stocks and penny stocks they would realize that they themselves fall into the category of micro cap stock or micro cap.
Companies think about this graham and meat kevin are youtubers their business is youtube graham makes it honest that it's about youtube meet kevin is a youtuber it's all about youtube but he likes to tell you that he makes money investing but really even the wall street journal when they did a piece on him talked about how he's his business.
Is youtube okay youtube ad revenue selling courses um now 20 minute coaching sessions right which he canceled that's what his business is about and then he gets people to watch his videos because he talks about investing but he talks about investing but his business is youtube right that's the that's the reality he tries to hide.
It but graham is open about it so if you look at the amount of money that these guys make from youtube graham let's say he makes 10 million a year uh meet kevin uh made 22 million one year and so let's say he also makes 10 million so what kind of company or business would you call it a business that makes 10.
Million dollars a year in revenue uh if you took this business public or if you valued that business it would be a micro cap company right because it would probably be valued i don't know 20 million 50 million depending on what multiple you want to put on it what multiple you want to put on it and and what uh bottom line it.
Generates but it would be worth maybe let's give it to them each of their businesses is worth 50 million 50 million is below 100 million so their business is a micro-cap business okay they are in a micro cap business so even though they are in a micro cap business i am in a micro cap business from a different perspective i buy into micro.
Cap businesses but from their point of view i'm a stock promoter i am a pump and dumper but them even though their entire world is about microcap business it's okay for them to be in the microcap business but it's not okay for me to be in the microcap business i use the same example with real estate people will buy a hundred unit apartment building for.
Four million dollars or five million dollars or ten million dollars whatever they will put their entire life savings the entire friends into this and that's okay privately that's okay but if that same apartment building was put into public vehicle and listed on a csc canadian stock exchange all of a sudden that would become a pump and dump micro.
Cap don't touch it see how ridiculous it is privately it's okay it's okay to be a microcap business as long as you don't you don't realize that you're in a microcut business but if you own microcap businesses in a public market what then you are categorized as a pump and dumper and you are engaged in a risky business so i hope that this.
Explanation was helpful to you there's a huge difference between micro caps stocks micro cap companies and penny stocks huge difference now just because something is trading for less than five dollars doesn't make it more risky or less risky just because something is trading for more than five dollars doesn't make it less risky or more risky.
What matters is the business behind it what matters is whether the business number one generates revenues generates profits or if the business is going to generate profits or revenues that's what matters fundamentals is what determine the success of the company so focus on that the stock price or the market capitalization alone.
Will never determine your success or failure you