How A Stock Moves Up From Pink Sheets To The Major Exchanges

Pink sheet stocks are considered by most to be extremely risky stocks. These are companies with very little public information and financial disclosure. Many times they are shell companies with paper stocks and without any product or service that has an acceptable market. Due to its lax nature of public disclosure, it is hard to attract new capital either from new shareholders or from bond issuers. However, a move from pink sheets to a listed security can do wonders in a company’s ability to raise capital in the market place.

What does it take to make this move and how does one go about it? After all, pink sheet stocks that are worth pennies could become worth tens of dollars, if not more, should they go on to be listed on the major exchanges. Who would not want to buy a stock for a few pennies and sell it for tens of dollars? After all, this is the very essence of capitalism.

The move from pink sheets to being listed on the major exchange requires overcoming many hurdles and meeting many requirements. One of the most common ways to make the move is to do it step-by-step. The first step would be to make a move from a pink sheet stock to the Over-The-Counter bulletin board. On the OTC bulletin board market, at least a stock is priced by a few market makers for the stock. Market makers or dealers will buy and sell stocks and create a market for those individuals who wish to trade, buy or sell these stocks. The market makers make a spread between their buy price and their sell price. To move to the bulletin board, a stock must generate enough buzz and excitement about its product and potential financial gains for the near future. Besides some savvy marketing, some assistance from some deep pocket players and a reasonable amount of public disclosure, the company must definitely have products that are marketable. Without a visible potential for the company’s products, it would be hard to make a move from pink sheets to the bulletin board and to the major exchanges.

There are an estimated 20-25 million small and micro cap investors in the United States. This is fertile ground to find the deep pockets for pink sheets and OTC stocks. The public that can and is willing to take risks in search of outstanding rewards is where a small company that is contemplating a move from pink sheets to the OTC market should concentrate on. Once the investing public can buy into the plan and the company, the move from the OTC to the major exchanges is easier since the company could go back to the same shareholders and ask for more capital. Having already seen a great gain on their initial investment, this group would be a willing shareholder base to build upon.

Obviously, the bigger hurdle is to move from bulletin board to being listed on the major stock exchanges. However, having proven the potential of great rewards, there is a more willing and a bigger pool of investors waiting to pour finances into the company now. At this stage, the company just has to provide complete disclosures and offer a good faith prospectus to move forward on to the major exchanges.