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Pink Sheets is an electronic system, published by Pink Sheets LLC, to display bid and ask quotation prices. The name "Pink Sheets" stems itself from an earlier paper-based system, which was printed on pink paper. It is mainly used by stock brokers trading OTC securities. Piece of paper Paper is a thin, flat material produced by the compression of fibers (or fibres). ...
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Over-the-counter (OTC) trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. ...
Pink Sheets LLC is neither an NASD broker-dealer, nor registered with the U.S. Securities and Exchange Commission; it is not a stock exchange, the companies listed don't need to fulfill any requirements. With the exception of a few foreign issuers, the companies quoted in the Pink Sheets tend to be closely held, extremely small and/or thinly traded. Most do not meet the minimum listing requirements for trading on a national securities exchange, such as the New York Stock Exchange or the NASDAQ Stock Market. 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. NASD executive office on K Street in downtown Washington, D.C. The NASD (formerly known as the National Association of Securities Dealers) is the primary SRO responsible for the regulation of persons and companies involved in the securities industry in the United States. ...
In commerce, a broker is a party that mediates between a buyer and a seller. ...
Dealer has a number of meanings: A person who sells on behalf of a company or organization, or who sells in bulk from a large common store. ...
The U.S. Securities and Exchange Commission, commonly referred to as the SEC, is the United States governing body which has primary responsibility for overseeing the regulation of the securities industry. ...
A stock exchange is a corporation or mutual organization which provides the facilities for stock brokers to trade company stocks and other securities. ...
New York Stock Exchange (June 2003) The New York Stock Exchange (NYSE) , also nicknamed the Big Board, is the largest stock exchange in the world in dollar volume and second largest by number of companies listed. ...
NASDAQ (originally an acronym for National Association of Securities Dealers Automated Quotations ) is a U.S. electronic stock exchange. ...
For these reasons, the SEC sees companies listed on Pink Sheets as "among the most risky investments" and advises potential investors to heavily research the companies they plan to invest in.
The appeal of the Pink Sheets in recent years has been that the issuer has relatively low "clearance" overhead, and can potentially have their stock listed on the NASDAQ OTCBB with a ".P" suffix. The NASDAQ machines are required for every "market maker," representing an unfair monopoly that has also seen the "spin-off" of the NASDR and the recasting of the NASDAQ as a for-profit corporation, out of the not-for-profit that was Delaware-incorporated.
The savvy Pink Sheets issuer is not interested in pumping-and-dumping his shares, but suspects a major business development or transaction is in the offing. The SEC does not want anything remotely like a "multiple" applied to the shares, and the savvy issuer has no qualms with this. The issuer still gets shares to offer to prospective employees, still gets tax advantages of incorporation, but is essentially a limited partnership being offered over the OTCBB machines.
Buying Pink Sheets shares is supposed to be difficult; broker-dealers are enjoined to weed-out "widows and orphans" who may get an email or word-of-mouth tip about a small stock. Many Pink Sheet 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.
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