Pink OTC markets are electronic quotation systems that deal with over- the counter securities, and are not to be considered or confused with the stock exchange.
The securities related to the OTC market tend to be inactively traded stocks, including penny stocks, where brokers can use Pink Quote to announce their bid and ask quotes and prices. This could be considered a double edged sword due to the fact that Pink Sheets companies do not need to fulfill any requirements and might be considered a "free for all" because of the stigma attached from investment scams, stock in bankrupt companies, and shares that trade for pennies.
Pink Sheets typically are extremely small, thinly traded, or bankrupt. Most do not meet the minimum U.S listing requirements for trading on a stock exchange. This is where the benefits come in for these pink sheets; it is a totally different market. Many of these companies do not file periodic reports with the SEC, making it very difficult for investors to find reliable information about those companies. They have long been considered a risky investment, but are making a comeback with international companies starting to play in the mix.
International companies are starting to move in because they get admittance to American companies and investors at a much cheaper cost, with essentially no rules that other American companies have to deal with. These corporations include Dutch communications companies, French banks, amongst many others, and they certainly are getting a bang for their buck. As mentioned earlier even though companies do not have to disclose all the SEC information, the OTCQX companies still have to provide audit information and the like to Pink OTC markets.
So what's the latest on these Pink sheets? Shortly, the nation's biggest market is going to drop "pink" out of its name from Pink OTC to just OTC Markets Group Inc. by next year. It still is depending on a vote from shareholders, to go into effect but it's because of the strive to show how its reputation has changed and headed into a direction of more legitimacy and disclosure. This move will give the stocks more respect, and attract more respectable companies.
Another way to improve their reputation, Pink Sheet traded companies have created a market tier as of April 5, 2010. All Pink Sheets traded companies that are not able or willing to meet the standards of OTCQX or OTCQB will be placed in one of three disclosure categories; current information, limited information, and no information. These categories increase the amount of information available for these companies that builds more of a trust and weeds out the more shady of companies. Investors still must keep caution when getting involved in these companies.
This is all good news for investors. With all these improvements regarding pink sheets, public interest has increased, pumping money back into the OTC markets. But still buyer beware. Spam campaigns and fraudulent activity can sometimes be inevitable and can be committed by the company or even by insiders. For this reason if there should be a spam campaign at any time only the current information category, mentioned earlier in the three category options will be excluded from quote blocks on pinksheets.com.
With a brief conclusion from the newest data available for Pink sheets, now is the safest time to spend.
Happy investing!
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