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Pink Sheets

“Pink Sheet Stocks”

A Pink Sheet Stock is a company whose shares are traded on the so-called “pink sheets”!

The Pink Sheets is an electronic quotation system that displays quotes from broker-dealers for many over-the-counter (OTC-traded) securities. Market makers and other brokers who buy and sell OTC securities, can use the Pink Sheets to publish their bid and ask quotation prices. The name “Pink Sheets” comes from the color of paper the quotes were printed on prior to the electronic system, then published by the National Daily Quotation Service. They are published today by Pink Sheets LLC, a privately owned company.

Pink Sheets LLC is neither a NASD broker-dealer nor registered with the U.S. Securities and Exchange Commission; it is not a stock exchange. To be quoted in the Pink Sheets companies do not need to fulfill any requirements (e.g. filing financial statements with the SEC). With the exception of a few foreign issuers (mostly represented by American Depositary Receipts, or ADRs), the companies quoted in the Pink Sheets tend to be closely held, extremely small, or thinly traded. Most do not meet the minimum U.S. listing requirements for trading on a stock exchange such as the New York Stock Exchange. 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.

For these reasons the SEC views companies listed on Pink Sheets as “among the most risky investments” and advises potential investors to heavily research the companies in which they plan to invest.

Buying Pink Sheets shares is supposed to be difficult. Broker-dealers are enjoined to weed-out unsophisticated investors who may get an e-mail or word-of-mouth tip about a small stock. Many Pink Sheets stocks may only be registered for sale in one state so that the only way to purchase the stock is to make a DRIP/business/unsolicited/accredited or other sophisticated form of investment. Many registered representatives do not even know how or if they can sell them.

“Pink Sheet” stocks have both advantages and disadvantages.

Disadvantages:

1. Usually traded in low volume. If you buy or sell shares they may not maintain liquidity.
2. Bid/Ask spreads can be pretty far apart as well. So if you bought today the stock might have to go up in “double digits” before you would make money selling.
3. Market makers may be limited, this may make buying or selling shares as a day trader more difficult you may have to do phone orders.
4. Can be tough to follow. Very little coverage by analysts and papers.

Advantages:

1. Normally low priced. Buying a few hundred shares should not cost a lot.
2. Many companies list in the “Pink Sheets” as a first step to getting listed on the Billboards or Stock Market Exchanges . This alone can result in some price appreciation, as it may attract buyers that were previously wary.
3. You can make huge returns. When a pink becomes a “Hot Stock” your returns can be several times your initial investment.

In other words, there are plenty of risks for the possible reward, but aren’t there always?

The National Quotation Bureau maintains the list of pink-sheet stocks. Their site gives the history of the pink-sheet listing service and information about real-time quotes for OTC issues.

We know how hard it is to find accurate information on companies that are traded as “Pink Sheets” or “Bulletin Boards”. Our only goal is to provide you with accurate information as fast as possible so you can beat the market makers in and get out before liquidity becomes an issue.

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