Finding unbiased information and research about penny stocks can be very difficult, much more challenging than looking for information and analysis on stocks that trade on the major market exchanges. A pink sheet stock is the common term used to describe stocks traded Over The Counter on the OTC Markets Group. This is a stock trading and information platform that lists information about nearly 10,000-penny stocks. |
While these stocks are traded electronically, they are called pink sheet stocks because in the days of paper trading, they were printed on distinctively pink paper. The OTC Market group is a separate and independent entity from the Over The Counter –Bulletin Board (OTCBB), another penny stock trading platform. The major difference between OTCBB stocks and pink sheet stocks is that pink sheet stocks are not required to meet the minimum listing requirements set by the Securities and Exchange Commission (SEC). Pink sheet stocks do not have to have any minimum market capitalization in order to train on the OTC Markets GROUP. This can make finding information about companies trading pink sheet stocks difficult.
Pink sheets stocks are known to carry a higher risk for price manipulation and investor fraud than either traditional stocks traded on exchanges or penny stocks traded OTC-BB. Some of the pink sheet stocks are well establishedforeign companies, looking for a foothold into the major markets, while other companies do not meet the minimum listing requirements for either the major exchanges or the OTC-BB. Very small, thinly traded US companies are likely to make their home among the pink sheets. Investors looking to capitalize on pink sheet penny stocks should be careful about where and from whom they are receiving tips and research.
Major finance sites like Yahoo Finance, Google Finance, and Bloomberg have some limited information about pink sheet stocks. The best place to begin your research into these companies is the OTC Markets Group website (www.otcmarkets.com). This site provides basic company information, news and press releases, published financials, short sales, filings and disclosure and research reports. Investors should pay close attention to the company information and disclosure statements. If the company files anything with the SEC, you’ll be able to read those reports online. In addition to providing basic share structure information, this site also lists company contact information, which is important if you need or want to contact the company for additional information.
Penny stock trading sites and their affiliated message boards are also good place to find information about pink sheet stocks. Active penny stock and pink sheet investors use these chat rooms and discussion forums to share information and tips about their investments and portfolio. These forums give investors a more personal view of pink sheet stock trading activities and an opportunity to share successes and challenges with peers.
There is an opportunity for big risks and big rewards when an investor chooses to trade pink sheet stocks. If the investor practices due diligence and conducts his or her own research, the risk of trading pink sheet stocks can be mitigated.
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