The Pink SheetsThe Pink Sheets over the counter stock quotes. OTC market. What are Pink Sheets? Investing with Pink Sheets penny stocks.
What Are Pink Sheets?OTC Pink Sheets is not an over the counter stock exchange but a private company which is defined by the SEC (Securities Exchange Commission)as an SIP (Securities Information Processor).The company, which began life in 1913 as the National Quotation Bureau used to publish over the counter stock quotes on sheets of pink paper. Pink Sheets quotes soon become known to investors by the color of the paper they were printed on. The company changed its name to Pink Sheets LLC in 2000 and upgraded from paper to real time, electronic Pink Sheet quotes. The name changed again in 2008 to Pink OTC Markets Inc. OTC Pink Sheets enables market makers to publish over the counter stock quotes (not just Pink Sheet quotes).
Pink Sheet Stock QuotesAny company that a market maker is willing to quote can become a Pink Sheet stock quote.The company sets no regulatory standard. In order to be listed on a major exchange like the NYSE, a company has to meet certain minimum standards. One being that they must file regular financial reports with the SEC. This is not required of companies which trade on the Pink Sheets. This lack of regulation is what makes Pinks Sheets trading more risky than trading OTC BB stock.
Investing With Pink SheetsThere are 4 tiers of OTC stocks. The Pink Sheets make up the third tier ranking only higher than the Gray Market.This is because of the lack of financial transparency of the companies which trade off the Pinks. Even if there is a recent financial report on file, they will almost certainly not report on a quarterly basis so you don't know when to expect the next report. Most Pink Sheet stocks are micro caps. They are start ups, companies which are at risk of going bankrupt or have already done so. The biggest risk you take on as a stock market trader is bankruptcy risk. If you are holding securities in a company which goes bankrupt, you will most likely lose your entire investment. Even if you can place stops on your position, they will not protect you from bankruptcy risk. I personally avoid buying Pinks because of this lack of transparency. There are so many good over the counter penny stocks to buy on the OTC Bulletin Board. Why take the added risks of Pinks Sheets trading?
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