To the investing outsider, the words “pink sheets” may conjure up images of bed sheets the color of Pepto-Bismol. However, in regards to the investing community, those two words mean something else entirely. In reality, the pink sheets are a publication that is published on a daily basis that tells the bid prices and the ask prices of over-the-counter stocks. Over-the-counter stocks, or OTC stocks, are stocks that are not listed or traded on the stock exchange like other stocks are and, thus, do not have to meet any minimum requirements or file with the SEC.

You are probably wondering why these publications are called the pink sheets. The reason they are called such is because the publications were printed on pink paper. This made them stand out and people knew that they were looking at OTC stocks without having to look for an added symbol at the end of the stock name. However, it is rather easy to find a company on the pink sheets because they have the stock symbol “.PK” at the end of their stock name.

The Pink Sheets have several different market tiers:

OTCQX – This is the top tier. It is generally reserved for the companies that have met certain financial standards and have had a qualitative review.
OTCQB – Companies on this tier provide significant disclosure of their financial information to the public, though not enough to grant them trade on a stock exchange.
OTC Pink – The third tier that has absolutely no disclosure or financial requirements at all. The companies themselves decide how much to disclose to the public and investors.
Current Information – These are companies that have given information to the Pink Sheets within the past six months.
Limited Information – These are the companies that either cannot or will not meet the standards for providing current information to the organization. These companies have let some information be known, but not all.
No Information – These companies provide absolutely no disclosure to the public about their business.
Caveat Emptor (Buyer Beware) – These companies have a public interest concern associated with them and may have their stocks blocked.

Since the Pink Sheets do not require companies to meet any minimum requirements like the regular stock exchange does, most of the companies that are listed on them are rather small in both size and revenue. Stockbrokers tend to view the Pink Sheets as a list of companies that are very high-risk and all who seek to invest in them should do a lot of research into the company before putting any of their money into it. The way the economy is going, you can never be too careful with your money when you are looking to make investments.

On March 14, 2012 By Richard Wilson

Practice Test

Pink Sheets – About Over the Counter Securities

Not all stocks are sold through the main exchange systems, such as NYSE and NASDAQ. There are numerous smaller companies that do not qualify for these exchanges for whatever reason, and which can instead be bought and sold through an electronic system known as the Pink Sheets. These stocks are commonly called OTC or over the counter stocks. The companies that are quoted in this type of system tend to be small or closely held, and can be risky investments if you are not careful. Be sure to always conduct adequate research with the help of your broker, and pay attention to the classification of each company.

Many Pink Sheets stocks are sold through the premium market tier offered, OTCQX. This is an exchange that requires all listings to meet certain criteria. For example, they must have a minimum bid price of $0.25, eliminating so-called “penny stocks” from the exchange. They must be included in S&P or Mergent Manual, have 50 round lot shareholders, and have their annual financials audited by a registered audit form, to begin with. Those that do not meet these basic requirements for the OTCQX can then be listed on the Pink Sheets market in several other categories.

These other Pink Sheets exchange categories can include current SEC filers, who are registered but may not have current information that meets the requirements above. Another category includes banks, insurance companies, and foreign businesses that have current information but are not registered as part of the SEC system. Finally, there are some businesses that may have extremely limited information, no information provided at all, or stocks that are the subject of spam and other red flags for consumers. It’s important to pay attention to these categories if you are navigating through the stocks available on your own, to make the best decision.

The benefit to purchasing OTC stocks through the Pink Sheets exchange is that you can find some significant bargains, such as those smaller companies that are not yet big enough to list on the main market exchanges. There may be businesses out there, however, with bad credit or little to no information, and you should always proceed with the assistance of a professional broker if you are trying to find the best deal on these types of stocks. A good place to start is with the ranking system and some basic internet research into the company’s background.

On March 13, 2012 By Richard Wilson

Practice Test

Pink Sheets – Alternative Investments

Investment is a multifaceted world that can be as exciting as it is profitable. And since so many companies exist, ready to be traded, finding the best ones and getting what you think is a good purchase can be fairly tricky. One area of investing that some investors avoid while others embrace is in Over the Counter stocks, usually called pink sheets. These stocks carry with them some advantages and some risks, and knowing a bit more about them can help you decide whether or not they’re the right call for your investment dollars. Some love them, some hate them, but they’re nonetheless worth knowing about.

Basically, pink sheets are shares in companies just like traditional, better known stocks. However, unlike those traded on a stock exchange these shares are in companies that either don’t meet the requirements to appear in listings like the New York Stock Exchange or NASDAQ, or haven’t filed with the SEC. Many pink sheets companies are actually small businesses that are trying to move forward through selling shares, listing on Over the Counter lists to help raise capital. The name itself come from the fact that the original shares were once printed on pink slips of paper, but today they simple end with the notation of .PK.

Basically, the benefits of investing in pink sheets are the facts that they are usually a good bit cheaper than other stocks will be and that they could have major rewards. Investing in a small company early on could lead to serious profit if the company finds real success – a one dollar share could explode into a thirty dollar one. Of course, pink sheets are also far riskier than traditional stocks since there are no real reporting requirements. Also, the fact is that many businesses simply fail, and if you’ve invested in one of these you could be out a good deal of money.

While most investors agree that pink sheets are among the riskiest investments on the market, they can also be highly rewarding. If you’re thinking of visiting the Over the Counter boards then you should take the time to ensure that any company you invest in is thoroughly researched. You’re pouring your hard earned dollars into this company, after all, so be sure you know just what you’re getting yourself into. With a little bit of research and some careful choices, pink sheets could provide you with some very rich rewards.

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Pink Sheets – What Are They and Why Exactly Are They Called “Pink Sheets”?

Pink Sheets – About Over the Counter Securities

Pink Sheets – Alternative Investments

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