Speculative Company

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DEFINITION of 'Speculative Company'

A company with a significant percentage of its assets tied up in projects with uncertain returns. A speculative company participates in projects with high probability of failure. However, should a project succeed, the returns can be very large.


The stock of speculative companies is not necessarily classified as speculative stock, however, since the expected return of an established speculative company's stock (such as Exxon Mobil Corp or Shell Canada) can be reasonably estimated.

INVESTOPEDIA EXPLAINS 'Speculative Company'

Energy companies are an example of a speculative company, since they are continuously committing a significant percentage of their assets to exploration projects. These companies often experience many failures before a project succeeds. However, should they find a new source of oil or natural gas, the potential returns are huge.

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RELATED FAQS
  1. How can an investor profit from a decline in the real estate sector?

    Speculation enables investors to profit from a decline in the real estate sector. The most popular forms of speculation for ... Read Full Answer >>
  2. How does a company decide when it is going to split its stock?

    There are no set guidelines or requirements that determine when a company will split its stock. Often, companies that see ... Read Full Answer >>
  3. What securities can I use to engage in speculation of an asset while limiting my ...

    If you want to engage in speculation of an asset while limiting your costs, use a derivative security. Since a derivative ... Read Full Answer >>
  4. How can an investor profit from a fall in the chemicals sector?

    An investor can profit from a fall in the chemicals sector by short selling chemical stocks and exchange-traded funds (ETFs), ... Read Full Answer >>
  5. Why is it a bad idea for beginning investors to speculate in penny stocks?

    A penny stock is the stock of a company that trades below $5 and generally trades on the over-the-counter bulletin board ... Read Full Answer >>
  6. What is the difference between speculation and gambling?

    Speculation and gambling are two different actions used to increase wealth. However, the two are very different in the world ... Read Full Answer >>
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