Pink Sheets

What Are Pink Sheets?

Pink sheets are listings for stocks that trade over-the-counter (OTC) rather than on a major U.S. stock exchange. Many pink sheet listings are stock shares in companies that can't meet the requirements for listing on a major U.S. stock exchange like the New York Stock Exchange (NYSE).

Most pink sheet listings are low-priced penny stocks, implying that they trade for under $5 per share, and it is frequently seen as exceptionally speculative to trade in pink sheet securities.

Companies might decide to sell their shares through the over-the-counter network to stay away from the costs and regulatory requirements for listing on a large exchange.

Grasping Pink Sheets

Pink sheets were named for the shade of the paper on which provides of share cost estimates were distributed. The present trades are electronic, yet the name lives on as "Pink," a reference to over-the-counter stocks.

OTC alludes to the trading for the securities of unlisted companies. The shares trade by means of a broker-dealer network rather than on a centralized stock exchange. OTC Markets Group is a company that sorts out securities into three markets in view of the quality and quantity of information companies uncover and utilizes OTC Link technology to handle trades.

OTCBB versus the Pink Sheets

There are two primary platforms for the listing of over-the-counter securities, OTCBB, and pink sheets.

Pink sheets are OTC yet they are not OTCBB. Over-the-Counter Bulletin Board (OTCBB) is an electronic system that presentations over-the-counter securities with real-time statements and volume information. Shares listed on the OTCBB carry an "OB" postfix and must file financial statements with the Securities and Exchange Commission (SEC).

NASDAQ works the OTCBB which acts as a quotation service for over-the-counter sales. Shares are further split between the OTCQX and the OTCQB platforms. NASDAQ gives the technology used to carry out the everyday elements of the OTCBB and OTC trade however the OTCBB business is owned and regulated by NASD, the National Association of Securities Dealers.

Pink Sheets and Penny Stocks

Pink sheet listings incorporate penny stocks of small companies that don't have to file documentation with the SEC, notwithstanding, Pink companies might distribute disclosure through the OTC Compliance Unit and work straightforwardly with a broker-dealer to present a Form 211 with FINRA.

These companies are smaller than those that rundown on the OTCBB. Pink sheet penny stocks trade rarely and investors might experience issues finding an accurate price or find it hard to buy or sell when they need to go into a trade.

Brokers of penny stocks charge wide bid-ask spreads, or price statements, between the sell-side and buy-side. Penny stocks are generally considered profoundly speculative where investors might lose a sizable amount or the entirety of their investment. Some penny stocks including pink sheet stocks have proven to be fraudulent shell companies or companies on the verge of insolvency.

OTCBB Listings

Compared to the major stock exchanges, there are not many barriers to entry into the OTC markets. OTCBB requires just that refreshed financial reports be appropriately filed with the SEC, banking regulators, or insurance regulators.

Numerous OTC stocks are issued by companies that are too small in size to be listed on a major U.S. exchange. They might find the $295,000 NYSE listing fee, or the Nasdaq fee, to be a financial barrier. Likewise, when a company's share price falls below a set level, for example, $1, companies can be eliminated from a major exchange.

A few large international companies including the Swiss food conglomerate Nestle SA and the German drug company Bayer A.G. flourish with the OTC platform. They list on their nation of origin exchanges yet may track down the duplication of regulatory paperwork for a large U.S. exchange too onerous.

Bonds and derivatives likewise find a listing home on the OTC marketplaces.

SEC Regulation of Penny Stocks

Penny stocks frequently carry a heavier risk than stocks listed on the major exchanges. Stocks might fall to trading on the pink sheets in the wake of neglecting to meet SEC requirements for listing on larger stock exchanges. There are various SEC limitations and requirements governing how brokers trade penny stocks that attention on consumer protection and education.

Upsides and downsides of the Pink Sheets

Pink sheet listings offer small companies a chance to raise capital through the sale of shares to the public and make it simple for an investor to manage the cost of a stake in the market and pink sheet transaction costs are in many cases low.

Notwithstanding, pink sheets are inclined to fraud and price manipulation due to the lack of financial information required to rundown and lack of regulation. There is less public information and transparency encompassing the companies, and shares frequently trade inconsistently, making it hard to buy or sell when the investor needs.

OTC Markets Group records the most actively traded companies, including:

• Tencent Holdings LTD (TCEHY), the Chinese multimedia company
• BHP Group Limited (BHPLF), an Australian securities company
• Grayscale Bitcoin Trust (GBTC), an American Bitcoin trading platform

OTC Markets Group is one company that gives the SEC-regulated alternative trading system, OTC Link, to interface U.S. broker-dealers, giving liquidity and execution services to securities and investors approach data on 12,000 securities. Companies decide to meet all requirements for OTCQX or OTCQB markets or as a matter of course trade on Pink.

Features

• Most pink sheet stocks are considered penny stocks that trade for under $5 per share.
• Pink sheet listings are not listed on a major U.S. stock exchange.
• Pink sheets are listings for stocks that trade over-the-counter (OTC).
• Pink sheet stocks are considered risky due to a lack of regulatory oversight.

FAQ

What Was One of the Most Successful Penny Stock Offerings?

True Religion Jeans traded under a dollar for each share in the right on time to mid-2000s and in 2013 the company was acquired by Towerbrook Capital Partners for $32 per share, netting investors a 5,000% increase.

Where Can I Find Information on OTC Bitcoin Investing?

The SEC gives information here on OTC offerings and states that digital assets and technology bring increased risk of fraud and manipulation in light of the fact that the markets for these assets are less regulated than traditional capital markets.

What Is OTC Link?

OTC Link LLC is owned by OTC Markets Group Inc., which works OTC Link ATS, an Alternative Trading System (ATS) and electronic inter-dealer quotation system that showcases quotes from broker-dealers for some over-the-counter (OTC) securities. Broker-dealers who buy and sell OTC securities can utilize OTC Link ATS to distribute their bid and ask quotation prices.