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.
BREAKING DOWN '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.