Price per share says nothing about the company
A company worth 400 million dollars can trade at 40 cents or at 40 dollars depending only on how many shares exist. Market capitalization is price times share count, and the split between the two is arbitrary, which is exactly what a stock split demonstrates: the price changes, the company does not.
This is why "cheap" applied to a low price is a category error. The comparable figure is capitalization, or better, capitalization against something the business produces. A 20-cent share can be expensive and a 200-dollar share can be inexpensive, and the price alone cannot distinguish them.
The spread stops being a rounding error
On a share at 100 dollars, a one-cent spread is a hundredth of a percent, negligible. On a share at 20 cents, a one-cent spread is five percent, paid on entry and again on exit. The absolute spread barely changed; its proportion changed by a factor of five hundred, and it is the proportion you pay.
The same arithmetic applies to a single tick. One cent of movement on a 20-cent share is a five percent move, which is why low-priced securities appear so volatile in percentage terms. Some of that volatility is the business and some is simply the grid the price sits on.
The number to compute before enteringDivide the spread by the price. Above one or two percent, the round trip costs more than most edges are worth, and a limit order is not optional. This single division answers more about tradability than any chart of the same security.
Share count is where dilution lives
Because price is capitalization divided by share count, the count is the number to watch, and at the small end it moves. Companies funding themselves by issuing stock increase the count, and each existing holder's claim shrinks proportionally even if the business is unchanged.
Convertible instruments and warrants make this harder to see, because shares that do not exist yet can be created at a fixed price. The relevant figure is fully diluted share count, disclosed in the filings, and comparing it with the basic count across several periods shows the trend directly. A rising count against flat revenue is the mechanism by which a share price can fall while the business does not.
Which rules attach at low prices
US rules define a penny stock by price and by where it trades, generally below five dollars and not listed on a national exchange with sufficient standards. Where the definition applies, brokers carry additional obligations: a standardized risk disclosure, a suitability determination, written agreement for the first transaction and disclosure of the quote and their compensation.
Brokers also add their own restrictions: blocking certain securities, refusing unsolicited orders, or requiring extra acknowledgement. Those are policy rather than law, they vary, and they are worth checking before planning a trade. They also overlap heavily with off-exchange trading, since most securities meeting the definition trade there.