What Is an Ankle Biter?
Ankle biter is a slang term for a stock with low market capitalization.
Understanding Ankle Biter
Ankle biter is also used to describe very young children or possibly a small, aggressive dog. The idea is that both small children and dogs are so small that they can only reach one's ankles. This slang term emerged around the 1950s.
As an investment, ankle-biters tend to be quite volatile and are often thinly traded. On the plus side, ankle-biters often have greater growth potential than larger stocks and encompass many emerging technologies.
An ankle biter, generally, is a stock that has a market capitalization of less than $500 million. Such stocks are also referred to as micro-cap or small-cap stocks. They are also sometimes described more generally as secondary stocks. Although there is no etched-in-stone definition, typically, a stock is considered to be a small-cap if it has a market capitalization of $300 million to $2 billion, while a micro-cap stock is an issue with a market cap of less than $300 million.
Examples of Ankle-Biters
In 2013, contributing writer Dave Maney at Forbes.com reported on the so-called ankle-biter economy in a story headlined “The Ankle Biter Economy Rises.” In the article, Maney said that the ankle-biter economy is “a new dynamic for the American economy,” that “[o]ur digitally-driven economic revolution has created a new governing algorithm in which large numbers of admirably aggressive, bumptious individuals and startups” are likely to “bring down established and formerly unassailable big incumbents with regularity.” In his conclusion, Maney says that the so-called "ankle biter economy" is representative of a new landscape where all of the old rules are thrown out and where investors will pay the price.
Yet despite this note of caution, in 2018, it appears that investors need not fear the ankle-biter economy. In February 2018, the Washington Post’s The Switch published a story that describes the company SpaceX being called an ankle-biter by competitors, a pejorative term in this case, but writer Christian Davenport points out that the company has worked as a disruptive force in the space industry. Indeed, SpaceX now seems positioned for growth: Davenport was reporting on a reception for the White House's National Space Council, headed by Vice President Pence and comprised of the secretaries of State, Commerce, Treasury, Transportation, and Defense along with other government officials.
Furthermore, news from the markets has become more encouraging regarding investment in micro-cap and small-cap securities as investors have begun to perceive them as lower risk than in the past. The steady performance from these smaller stocks has also generated excitement about them among some analysts.