Question: Shorting Penny Stocks?

If Penny Stocks almost always drop, why aren't they always shorted? Would that not be a guaranteed profit for any investor?

Answer:

There's a guy called Timothy Sykes who makes tons of cash Shorting penny stocks after they spike. If you can find material on how he makes his trades, you will benefit greatly regarding this subject.

I could tell you myself, but I just don't feel like taking the time right now, sorry.

You have to borrow a stock in order to sell short. There is no way to short penny stocks because it is impossible to borrow the shares.

Normally there are two main sources for stock lending:

1) Institutional investors (mutual funds, endowments, etc.). They never buy penny stocks, so no inventory from this source.

2) Individual investors. A broker can lend out shares that an individual holds in a margin account. However, no brokers allow penny stocks in a margin account. They can only be held in a cash account, so again no availability.

No availability => no ability to borrow => no way to short. This is part of the reason why pump and dump schemes are prevalent in penny stocks. There is no short selling discipline to correct the abuses.