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Wednesday, March 7, 2007

Problems with OTCBB & Pink Sheet Stocks?

Although both OTCBB and Pink Sheet stocks include stocks of really good companies trying to make their listings in major stock markets, are also have stocks of really bad companies delisted from major markets and on the verge of bankruptcy. Below are some problems in trading OTC stocks.
  • No/simple Minimum Requirements : Pink Sheet companies does not have to meet any minimum requirements, where OTCBB companies have to meet some simple requirements.
  • Lack of Information : some companies even hide their present status from public.
  • No proper Financial History : many companies are new ones.
  • Low Liquidity Level : making selling of purchased stocks very difficult.
  • Price Manipulation : a single broker can perform so.
  • False/Promotional Advertisements : through all sorts of media to highlight a bad company or saying that all top companies are once penny stock companies.
The broker assisted trades with slow pace and lack of real-time market information can even worse the scenario. As an investor if you really want to trade these OTC markets, make sure that you know the company and the information you received about it is from a reliable source.

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posted by Daniel Pipitone at 11:42 PM  

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