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Most investors are tired by the length of the Counter Bulletin Board (OTC). That's understandable, considering the number of bankruptcies, companies Shell, and listings that are produced in excess of the counter markets. But there is a big mistake that is widely shared among investors: that no over-the-counter company has to report current financial information. Such is the case with the Pink Sheets, but not so with the OTCBB.
You see, before 1990 the over-the-counter market securities was a Wild West show. It is not anarchy, but close to it. So year, the SEC started the Over The Counter Bulletin Board as part of the Reformation Penny Stock Act. The main objective was to take over OTCBB listing and sale information last minute. In 1999, the OTCBB had evolved to the point where that each firm had to report regular financial information. This is unlike the others, namely the Pink Sheets, which have no reporting requirements.
There are absolutely no requirement for Pink Sheet companies. They do not have to file periodic financial information and current (although a system recent classification that is changing slowly), without a strict minimum requirement of market capitalization, and certainly does not pay the couple of hundred thousand dollars to be traded on major exchanges.
The OTCBB, on the other hand, is a much more stringent the Pink Sheets. During Bulletin Board against the companies have to keep up with the periodic financial information. This really makes all the difference in the world.
Here's an example:
Company A is traded through the Pink Sheets, and Company B is on the OTCBB. Both issue news releases companies claiming to be "the transition of their business." Company A really just dropped into a shell company status, because no one has to know what is really happening there. Whereas Company B has to file regular quarterly earnings. If the OTCBB does not add an ear of donkey (or in this case the letter "E" at the end of trading of the company), which immediately tells investors that the company was not enough sample corporate responsibility. This can make or break the investment. People invest in Company A are out of luck. Investors Company B can go before the things get too hard.
But that does not explain why OTC companies are still worth investing in. There are two reasons for getting involved in the OTC market …
The main reason most OTCBB investors keep marketing of these values is the potential benefit. Obviously, a chip 300 billion U.S. dollars not Blue can double in size too easily. That does not give investors much to work with. A company of 3 million U.S. dollars can double in size overnight without blinking. What would you rather have in your wallet?
The second reason is also very clear. Because many of these small companies are working on a much smaller scale, overall general market attitude has very little effect on them. There are almost never large institutional investors or large managers mutual funds pulling money in and out of these companies. These two groups of investors are more interested in the macro market sentiments what they are doing individual firms. Thus, in bear markets, it is possible to have a lot of these OTCBB companies take off.
In a 2001 study published in the Journal of Alternative Investments, a period of four years of trading in the Counter Bulletin Board was considered by the risk of re-connection. The interesting finding he came up with was that OTCBB stocks did not reflect what the general market was doing at that time. There were some years of general bullish sentiment extreme, which can defined as a solid return on the S & P, and the overall OTCBB market lost much money. On the flip side of that, years of extreme pessimism in the S & P along with major exchanges, showed positive benefits for many OTCBB companies.
So if you are a safe bet type of investor or a fly-by-the-seat-of-your-pants type, there is still a place for you, with all major markets.
Sincerely,
Jim Nelson, Managing Editor Penny Sleuth
About the Author:
Jim Nelson is the managing editor of the FREE daily e-letter The Penny Sleuth. The Penny Sleuth offers unbiased commentary from expert analysts and authors on Small Cap Stocks, Penny Stocks, OTCBB and Pink Sheet Companies.
Article Source: ArticlesBase.com – Investing in the Over the Counter Bulletin Board (otcbb)
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