OTCBB and Pink Sheets Penny Stocks
Pink Sheets – OTCBB – Pink OTC Markets
On the path to becoming a publically traded company, many startup companies might first get listed on the Pink OTC Markets, formerly known as “Pink Sheets” exchange.
Pink OTC Markets Inc. is a privately owned company that operates “Pink Quote,” an electronic quotation system that displays quotes from broker dealers for many Over-The-Counter (OTC) securities frequently called “Pink Sheets.” The name “Pink Sheets” comes from the color of paper they were historically printed on.
Whether you call it Pink OTC Markets, Pink Quote, or the Pink Sheets exchange, if a company is listed in the Pink Sheets, it is officially a “publicly traded” company, although Pink OTC Markets Inc. has no listing or reporting requirements for these companies. But being publically traded has many advantages in a company’s potential growth.
It is desirable to become a publically traded company because it becomes easier to raise capital or obtain financing. Also, becoming publically traded gains credibility and can be used to attract other resources such as better employees, various contracts and partnerships, and other potential investors, any of which can provide the break-through growth for an emerging company.
Once a publicly listed company it also becomes easier to be transferred from the Pink Sheets exchange to larger major exchanges, such as the NASDAQ or NYSE. Once companies are ready to become fully or semi-reporting, they often go from the Pink Sheets to the OTCBB.
The Over the Counter Bulletin Board (OTCBB):
The Over the Counter Bulletin Board (OTCBB) is an electronic quotation system that displays real-time quotes, last-sale prices, and volume information for many over-the-counter securities that are not listed on The NASDAQ Stock Market or a national securities exchange. Brokers who subscribe to the system can use the OTCBB to look up prices or enter quotes for OTC securities.
Note that although the National Association of Securities Dealers, Inc. oversees the OTCBB, the OTCBB is its own entity, and not part of The NASDAQ Stock Market.
Under the OTCBB’s eligibility rule, companies that want to have their securities quoted on the OTCBB must file current financial reports with the SEC or with their banking or insurance regulators.
The OTC Bulletin Board (OTCBB) eligibility rule required companies whose securities were quoted on the OTCBB to file updated financial reports with the SEC or with their banking or insurance regulators. If these companies failed to file current financial reports, their securities would be removed from the OTCBB, but could be quoted in another system, such as Pink OTC Markets’ Pink Quote inter-dealer quotation service.
The eligibility rule was phased in over a 12-month period and ended June 22, 2000. On the OTC Bulletin Board’s website, you can find a history of the rule and data concerning companies that were removed from the OTCBB. If you are considering investing in a company that trades on the OTCBB, you can find reports filed by the company on the SEC’s EDGAR database.
Many companies grow from the OTCBB to the NASDAQ, NYSE, or other major exchanges. In fact, there are many potentially good penny stocks on the NASDAQ; stocks that trade for $5 or less.
Getting Started – Making Penny Stock Fortunes:
There are many quality penny stock companies listed on the OTCBB and NASDAQ poised to make great gains in penny stock fortunes for their investors. The next Google, Microsoft, or Walmart are already out there for investors ready to get in on the ground floor in new sectors such as alternative energy, technology and other sectors.
There are services that evaluate and research penny stocks for you and can provide you with a recommended penny stocks list. For example, this penny stock newsletter uses analysis to select penny stocks and can help you with buying penny stocks.
More Helpful Information:
Trading in Pink Sheet penny stocks can be very profitable, but because of the lack of reporting requirements of companies on the Pink Quote or “Pink Sheets” system, I recommend you seek penny stock companies on the OTCBB and NASDAQ.
“Market Makers” and other brokers who buy penny stocks and sell OTC securities, can use the Pink Quote to publish their bid and ask quotation prices. Some investors make a lot of money buying penny stocks via the Pink Sheets, but you should know that Pink OTC Markets Inc. is not registered with the SEC in any way and it is not the Financial Industry Regulatory Authority (FINRA) Broker-Dealer.
Pink OTC Markets Inc., who operates Pink Quote (or the Pink Sheets), does not require companies whose securities are quoted upon its systems to meet any listing requirements.
With the exception of a few foreign issuers, the companies quoted in Pink Quote tend to be closely held, extremely small and/or thinly traded. Most do not meet the minimum listing requirements for trading on a national securities exchange, such as the New York Stock Exchange or the NASDAQ Stock Market.
Many of these companies do not file periodic reports or audited financial statements with the SEC, making it very difficult for investors to find reliable, unbiased information about those companies.
However, some broker-dealers are required by Rule 15c2-11 under the 1934 Act to have some information about the issuer. Ask your broker-dealer whether it has any Rule 15c2-11 information before you invest.
For all of these reasons, companies quoted in Pink Quote can be among the most risky investments. That’s why you should take extra care to thoroughly research any company quoted exclusively in the Pink Quote, or focus instead on the OTCBB and NASDAQ systems for buying penny stocks.
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Buying Penny Stocks
