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Microcap & Penny Stocks : TGL WHAAAAAAAT! Alerts, thoughts, discussion. -- Ignore unavailable to you. Want to Upgrade?

To: Jim Bishop who wrote (76767)	1/15/2001 12:13:15 PM
From: CIMA	Respond to of 150070

The OTCBB Versus The Pink Sheets: What is the Difference? By Sandra Nether Published by OTCBB News Network You heard about this great penny stock on the message boards. You decide you like the company after spending considerable time at their website and doing independent research. You like their concept or business model. You like the stock price. It is low enough so that you can buy huge leverage. What you don’t like is the fact that the stock is listed on The Pink Sheets. What is the Pink Sheets? And why would you base your decision to buy a stock on which exchange it is listed on? Here is a short primer on the difference between the OTCBB and The Pink Sheets. The OTCBB is not really a stock exchange. It is rather an electronic bulletin board featuring over-the-counter stocks (OTC companies are those with stock issues that are not listed on any major stock exchange like New York Stock Exchange, American Stock Exchange, or Boston Stock Exchange). OTCBB stands for Over-The-Counter-Bulletin Board. It is essentially a computer network owned and operated by the National Association of Securities Dealers (the same company that runs NASDAQ). Market Makers quote the stocks and post the best bid (the price that market makers will pay for a stock) and ask (the price that market makers will sell a stock for) prices on the system. The OTCBB has been around since the early 1990s (http://www.otcbb.com). The Pink Sheets is an electronic system that works exactly like the OTCBB, except it is owned and operated by a different company called The Pink Sheets, LLC (formerly called the National Quotation Bureau). Like the OTCBB, market makers post the best bid and ask price on a computer network, and investors obtain quotes from a broker or the Internet. The Pink Sheets have actually been around as a “hard copy” quotation service since 1904, but the new electronic system has only been up and running for a year or so (http://www.pinksheets.com). Essentially, The Pink Sheets knew they could never provide a slow, old fashioned, hard copy quote distribution service and stay in business in the Internet age. So in order to keep up with the OTCBB, they made their quote system electronic. So we have established that both The Pink Sheets and the OTCBB are electronic systems that work essentially the same. Both systems feature OTC stocks (many investors are confused and think that the companies listed on The Pink Sheets are not OTC). However, the differences between the two have to do with the listing criteria for companies. For years, the OTCBB allowed companies that do not periodically report their financials to the Securities and Exchange Commission (SEC) to be listed. Almost 8,000 companies were listed at one time. But two years ago, the OTCBB changed the rules and decided to require companies to report financials. Those that didn’t complete and post financials within a certain period of time were de-listed (thrown off the OTCBB). Those companies that could not comply with the new regulations, however, had a home with The Pink Sheets. Unlike the OTCBB, the Pink Sheets do not require the filing of any SEC reports. By the time the smoke cleared, approximately 5,000 companies were de-listed and moved to the Pink Sheets. The major problems for companies listed on The Pink Sheets have to do with both reality and perception. OTCBB investors got spoiled on the quality of service provided by the OTCBB system. The OTCBB has always readily displayed the best ask and bid prices available. OTCBB quotes are available all over the Internet, often in real time, free of charge. The Pink Sheets charge a steep subscription fee for real time quotes. The last stock price and volume is available on some quote systems on the Internet on a delayed basis, but there is never a bid and an ask price available except on The Pink Sheets website. So the quality of service of the OTCBB is considered superior by investors. The second problem has to do with perception. The Pink Sheets has a major public relations problem to overcome. If you read stock message boards or comments about companies listed on the Pink Sheets, you would quickly learn that The Pink Sheets are despised. They are viewed as an inferior system, a “joke,” filled with empty companies that are scams and shams. The sad thing is this couldn’t be further from the truth. If there are more scams on The Pink Sheets, it is only because there are more companies listed there. There are lots of scams on the OTCBB. Relevant information is often hidden in the SEC filings that are difficult to read. What is the difference between not reporting certain information and burying it in a confusing filing? Reporting to the SEC is expensive and time consuming. Some companies believe their time is spent better running the company rather than paying attorneys and accountants. So they chose to remain on the Pink Sheets. Other companies just don’t want to be listed on the OTCBB for whatever reason. The world-renowned map maker, Rand McNally was listed on the Pink Sheets for years. A recent glance at the Pink Sheets revealed lots of stocks priced in the $50 to $100 price range. Some companies wish to remain tightly held and only went public simply to have better access to capital if needed. They may have found a Pink Sheet listing help them accomplish this. The bottom line is, it doesn’t matter where a stock is listed. Which exchange it is listed on often has no bearing on how good of an investment it will be. Over the years, I have seen $50 New York Stock Exchange listed stocks with millions of dollars in assets and revenues ran into the ground to pennies. On the other hand I have also seen stocks listed on the Pink Sheets rise out of obscurity and move from pennies to dollars as they moved from the research and development stage to profitable operations. For some reason, this year I have seen more OTCBB casualties than ever before—an increasing number of companies seem to be filing bankruptcy or doing reverse splits. Are more companies really in trouble than ever before? Or is it that because of the new SEC reporting requirement of the OTCBB, nothing can remain in the dark anymore? You have to do your own research and decide for yourself which companies to invest in. Don’t overlook a stock and rule it out just because it is listed on The Pink Sheets. Do quality research no matter which company you are looking at. If a company does not report financials you can obtain their phone number from your stock broker and ask them to send you the latest financials. Sometimes these companies will post their financials on a website. Since 5,000 companies are now listed on The Pink Sheets there could be a gold mine of opportunities. Good investment candidates are companies that are upper tier Pink Sheet stocks (companies that will soon start to file financial reports and move to the OTCBB). Never act on stock tips alone. In the stock market always remember that proper study and research can mean the difference between making and losing money. As Bud Fox said to a fellow broker in the 1980s movie Wall Street, “do your own research Marv.”