Pink sheet penny stocks trade infrequently and investors may have difficulty finding an accurate price or find it difficult to buy or sell when they want to enter into a trade. With pink sheets, you can find companies whose stocks you might want to trade — long or short. Pull up their charts on a platform like StocksToTrade to start researching where those stock prices might be heading. Pink sheet stocks are traded in over-the-counter marketplaces rather than in exchanges like the New York Stock Exchange (NYSE). The quotes for these kinds of stocks used to be printed on pink paper.
Good Food Corp is a fairly small company with low administrative overhead. As a result, the company doesn’t want to have to file financial statements with the Securities and Exchange Commission (SEC). It also wants to keep its financial overhead low.
Why Companies List on the Pink Sheets
When it comes to pink sheets-listed companies, you can invest in a small company that may not be nationally known. Investing in this company can be quite profitable if it continues to grow; it may even end up on a major exchange in the future. However, pink sheets are prone to fraud and price manipulation due to the lack of financial information required to list and lack of regulation. There is less public information and transparency surrounding the companies, and shares often trade infrequently, making it hard to buy or sell when the investor wants. Pink sheet stocks aren’t regulated like stocks on the major stock exchanges.
- The pink sheets bring their own specific risk factors.
- When this happens, you need to pay careful attention.
- Many OTC stocks are issued by companies that are too small in size to be listed on a major U.S. exchange.
- These investments are considered speculative, which implies greater risk.
- These tiers make it easier to steer clear of the higher-risk companies listed on the pink sheets market.
- Stocks that are listed on the pink sheet are always small penny stocks that trade below five dollars per share.
Stocks that trade over the counter are broadly referred to as “pink sheets,” but the term technically has a more specific meaning. All pink sheet stocks trade over the counter through dealer networks. But not all OTC-traded stocks are listed by OTC Markets Group, the publisher that originally used pink sheets.
OTC Pink Listing Requirements
You’re taking a risk because you believe the potential reward outweighs it. I have several indicators I check for every trade using in my Sykes Sliding Scale. You can learn how to use this tool to help plan trades by studying my “Trader Checklist Part Deux” guide. Answer all these questions so you know what you’re getting into.
Bayer is a large pharmaceutical company with almost 100,000 employees. A free market economy means that people (and companies) buy and sell with a minimum of government regulation. Another over-the-counter quotation service, OTCBB, is operated by the Financial Industry Regulatory Authority (FINRA).
What are pink sheets?
There’s no such thing as a safe investment or a safe trade. Worse, if a stock moves opposite your trade thesis, you might not be able to find buyers. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Discounted offers are only available to new members. When investing in real estate, you have multiple options.
A company may be listed on the OTCBB for a number of reasons. It may be too small to list on the major exchanges. Or it may fail to meet a major exchange’s requirements and be delisted. It’s owned and operated by the Financial Industry Regulatory Authority (FINRA). It provides market information through its website.