OTC Bulletin Board®

The OTC Bulletin Board® (OTCBB) is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (OTC) equity securities. The OTCBB listing requirements includes companies that have no asset or revenue requirements, so virtually any company can become public via the OTCBB, but are required to be ‘fully-reporting’. This means they must be audited by a PCAOB Registered Accounting Firm and must comply with the requirements of Sarbanes-Oxley. These are the same fully-reporting requirements of a NASDAQ or NYSE Alternext (formerly the American Stock Exchange) traded company. And although somewhat burdensome, a fully-reporting OTCBB public company is far more respected by the SEC, investors, traders and brokers than non fully-reporting public platforms like the Pink Sheets. In addition, being a fully reporting company prepares the company for graduating to a higher exchange. Smaller companies initially go public on the OTCBB, and then, by meeting certain requirements, move up to the NASDAQ or NYSE Alternext at a later date.

Benefits of Trading on the OTCBB

  • Complete transparency.
  • Respected trading platform.
  • Greater company valuation.
  • Greater access to capital.
  • May raise money and stock is now valued and tradable on an exchange.
  • Ability to utilize stock to make acquisitions.
  • Greater employee attraction and retention.
  • Increased liquidity for the company founders, investors, and shareholders.
  • Gives the founders an exit/retirement strategy.
  • Enhanced credibility and prestige.

Main Requirements for an OTC Bulletin Board Listing

  • Audited Financials by a PCAOB registered auditor.
  • Quarterly reports.
  • Must comply with Sarbanes-Oxley.

Pink Sheets

The Pink Sheets listing requirements provides listings for companies with no asset or revenue, so virtually any company can become public via the Pink Sheets. Moreover, they are not required to be ‘fully-reporting’ (although some pink sheet companies choose to be fully reporting voluntarily). This means they do not have to be audited by a PCAOB registered public accounting firm on an ongoing basis and they do not have to comply with the requirements of Sarbanes-Oxley. However, in order to file a registration statement, even Pink Sheet stocks must be audited initially. There is another way to take your company public on the Pink Sheets without an audit, but it takes 12 months.

Go Public on the Pink Sheets via Direct Filings

  • Time - Typically 4 to 8 months.
  • Cost - Typically $60,000 to $100,000 (check our prices).
  • Raising Capital - May raise money and stock is now valued and tradable on an exchange.
  • Advantages over reverse mergers:
    - Much cheaper.
    - No skeletons in the closet.
    - The shell is custom designed to the client's needs.
    - Shareholders of operating company receive registered free trading shares.

Go Public on the Pink Sheets via Reverse Merger (Buying an Exisitng Pink Sheet Shell Company)

  • Time - Typically about 4 weeks.
  • Cost - Typically $200,000 to $300,000
  • Problem - Potential skeletons in acquired shell and more expensive than going straight to the Pink Sheets via filings. Harder to find financing for Pink Sheet companies.
  • Advantages - This is typically the quickest way to go public. In addition, non-control investors may receive free trading shares. No need for financial audits. Do not have to comply with the requirements of Sarbanes-Oxley.

Pink Sheet Market Tiers

CURRENT INFORMATION
Reporting companies that submit filings to regulators with powers of review and that make the filings publicly available or non-reporting companies that make current information publicly available through the OTC Disclosure and News Service pursuant to Pink OTC Markets' Guidelines for Providing Adequate Current Information (pdf). The Current Information category is based on the level of disclosure and is not a designation of quality or investment risk. This category includes shell or development stage companies with little or no operations as well as companies without audited financials and as such should be considered extremely speculative by investors.

LIMITED INFORMATION
Designed for companies with financial reporting problems, economic distress, or in bankruptcy to make the limited information they have publicly available. The Limited Information category also includes companies that may not be troubled, but are unwilling to meet Pink OTC Markets' Guidelines for Providing Adequate Current Information. Companies in this category have posted limited financial information not older than six months through the OTC Disclosure and News Service, or have filed a Quarterly Report, Annual Report, or 8K with a period end date within the previous six months on the SEC's EDGAR system.

NO INFORMATION
Indicates companies that are not able or willing to provide disclosure to the public markets - either to a regulator, an exchange or Pink OTC Markets, or if they do, the available information is older than six months. This category includes defunct companies that have ceased operations as well as 'dark' companies and/or companies with questionable management and market disclosure practices. Publicly traded companies that are not willing to provide information to investors should be treated with suspicion and their securities should be considered highly risky.

GREY MARKET
There are no market makers in this security. It is not listed, traded or quoted on any stock exchange, the OTCBB or the Pink Sheets. Trades in grey market stocks are reported by broker-dealers to their Self Regulatory Organization (SRO) and the SRO distributes the trade data to market data vendors and financial websites so investors can track price and volume. Since grey market securities are not traded or quoted on an exchange or interdealer quotation system, investor's bids and offers are not collected in a central spot so market transparency is diminished and Best Execution of orders is difficult.

CAVEAT EMPTOR
Buyer Beware. There is a public interest concern associated with the company, which may include a spam campaign, questionable stock promotion, known investigation of fraudulent activity committed by the company or insiders, regulatory suspensions, or disruptive corporate actions. During the time it is labeled Caveat Emptor, any stock that is not in the Current Information category will also have its quotes blocked on pinksheets.com.

How to Decide What Type of Pink Sheet Company to Buy/Invest In?

  • Current Reporting Pink Sheet
    a. Pros
       i. Easiest & fastest to get to the OTCBB.
       ii. Already audited.
       iii. Due diligence is readily accessible.
    b. Cons
       i. Most expensive.

  • Delinquent Reporting Pink Sheet
    a. Pros
       i. Cheaper alternative to reporting Pink Sheet that is "Current".
       ii. Registration statement has already been filed.
       iii. Due diligence may be available.
    b. Cons
       i. Potentially could be difficult to audit.
       ii. Getting previous auditor consent may be difficult.
       iii. Accounting for unrestricted stock could be difficult.

  • Non-Reporting Pink Sheet
    a. Pros
       i. Cheapest alternative (range from $150,000 to $200,000).
       ii. No need for previous auditor consent.
       iii. Clearer understanding of reporting status and what needs to be done to get to the OTCBB.
    b. Cons
       i. Takes the most amount of work and money to get to the OTCBB.
       ii. Need to obtain an audit.
       iii. Need to file Form 10 type information.

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Outlined Process to Move a Pink Sheet Stock to the OTC Bulletin Board