Many people's knowledge of stocks and investing is limited to what they see on the major stock exchanges boards through financial news reporting on television and the daily listings of stock value fluctuations in the newspapers. There are investors, however, who prefer to put their money on smaller companies.
These stocks are called microcap stocks, and can be found in
OTCBBs and the Pink Sheets. Knowing a little bit of the history of the Pink Sheets is useful when a potential investor is looking for a micro capitalization company to invest in.
Early in the 20th century (1913), a U.S.-based company called the National Quotation Bureau began reporting stock quotations and bond quotations from the different markets, publishing stock quotations on pink sheets of paper, and publishing bond quotations on yellow sheets of paper.
The reports have been very useful to
stock traders, especially for over the counter (OTC) dealers and investors, and over time, the term pink sheets became synonymous with over the counter
stock trading.
Towards the end of the 20th century (1997), the National Quotation Bureau came under a new management team that was dedicated to using technology to improve services offered to customers. Soon after the new management team took over, in 1999, the NQB introduced an internet-based real-time quotation of over the counter stocks and bonds called the Electronic Quotation Service.
In 2000, the National Quotation Bureau soon changed its name to Pink Sheets LLC and operated www.pinksheets.com, a web portal for information on over the counter securities and issuers.
Recently, Pink Sheets LLC has changed its name to Pink OTC Markets, Inc. The company's press release said that the change from a limited liability company to a corporation more accurately reflects and communicates the company's position as a technology and financial provider for OTC securities.
The Pink Sheets is not a stock exchange it is a private company that used to publish quotes on pink sheets, but now does it via its electronic quotation system. Market makers and brokers use the pink sheets to publish the stocks they are selling and ask for buy bids.
Companies whose stocks are listed and traded in stock exchanges need to fulfill certain requirements, such as filing financial statements with the Securities and Exchange Commission. Each stock exchange has its own minimum listing requirements such as the number of publicly traded shares, total market value, stock price, and number of shareholders. Companies quoted in the Pink Sheets do not need to fulfill any of these.
While companies on the Pink Sheets are not required to fulfill any requirements, there are those listed in the pink sheets that have stocks traded over the counter, have operating businesses, and provide substantial disclosure to the marketplace, as well as audited financials and certain disclosures to Pink OTC Markets Inc. These companies are listed with the Pink Sheets OTCQX, under two tiers: the higher-tiered PremierQX; and PrimeQX for companies that are too small for PremierQX but still meet the reporting requirements.
Since 2007, all the companies quoted in the Pink Sheets that are unable or unwilling to meet the OTCQX requirements are categorized as Current Information, Limited Information, No Information, or Caveat Emptor. According to Pink Markets OTC Inc., these categories are meant to provide more information on the companies listed on the pink sheets, and are not an indication of the quality of the companies stocks.
Investors considering these companies for investment should still exercise caution as the listings may include speculative, questionable, or distressed companies.
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