A Handful of Penny Stocks Just Made Up a Fifth of U.S. Volume
For a stark illustration of how dominant individual investors have become in U.S. equities, check out the proportion of volume happening in the tiniest stocks.
While it’s not unheard of to see a microcap like pet-medicine maker Zomedica Corp. top the most-active list with a billion shares traded, as it did Monday, it is notable when it and five other companies selling for less than $1 make up almost a fifth of overall volume. That also occurred yesterday, data compiled by Themis Trading LLC’s Joseph Saluzzi show.
Hand-over-fist buying by retail day traders, a hallmark of markets for a better part of the past six months, is sending volume skyward both on major exchanges and elsewhere. One way of seeing the impact retail traders have on volume is to compare it at places like NYSE and Nasdaq with that on broker-operated venues, where orders from apps like Robinhood are often steered. Trading on the latter exceeded the former last month for the first time since at least 2008, data compiled by Bloomberg show.
“I thought it was pretty odd,” said Saluzzi, co-head of equity trading at Themis Trading. “I’ve been around for a long time, I’ve seen people in chat rooms and retail investors saying ‘we can make some money - it’s easy.’ There’s a risk it may not end well.”
Share volume, elevated for months, spiked anew last week, when an average 14.8 billion shares changed hands on U.S. venues, ranking among the busiest stretches of all time. Only three weeks in March of last year and two during the financial crisis witnessed higher share turnover, data compiled by Bloomberg show.
For now, for the people making the trades, it’s working. The cheaper a company’s share price, the better its performance has been. On average, Russell 3000 stocks with price tags below $2 a share have surged almost 13% so far in 2021. Those with share prices below $5 are up close to 10%. That’s more than three times the gain experienced by stocks with share prices above $100.
Half a billion shares of Zomedica changed hands before noon on Tuesday, with turnover on track for another record after more than 1 billion shares traded on Monday. Tonix Pharmaceuticals Holding Corp., which develops therapies for disorders of the central nervous system, saw its trading volume on Monday spike to 12 times its 2020 average. Sundial Growers Inc., another penny stock that was among the most active on Monday, saw its turnover jump nine-fold from its average last year. All told, traders in these stocks, along with Acasti Pharma Inc., BioNano Genomics Inc. and a few others, traded 2.6 billion shares on Monday, almost one-fifth of the entire trading that day.https://www.bnnbloomberg.ca/a-handful-of-penny-stocks-just-made-up-a-fifth-of-u-s-volume-1.1547577