Pink Sheets Disadvantages

With the recent fall of stock prices in major stock exchanges such as the New York Stock Exchange and NASDAQ, some companies whose stocks have been trading in these exchanges may be moved, or have been moved to the Over the Counter Bulletin Board (OTCBB), and/or the Pink Sheets.

The stock exchange minimum trading standards which Pink Sheets or OTCBB stocks often do not meet can be one or more of the following: corporate disclosures, minimum number of shareholders, SEC filings, minimum number of shares, and share price values.

There are advantages and disadvantages to making stocks investments in companies listed either in the OTCBB and or in the Pink Sheets. The primary advantage is that share prices are generally lower. Pink Sheets stocks are cheap, hence the name penny stocks.

Many of these companies are startups with a vast potential for enormous growth. The buyer may be able to make stocks investments with a high growth company that moves to a larger stock exchange, or that could be acquired by another company at a premium price.

The third advantage of making stocks investments in penny stocks is that these stocks have the potential to appreciate very quickly. It is not uncommon for stocks traded in the Pink Sheets to rise in value in a matter of days, sometimes even in a matter of hours. A 10-cent stock share can rise to 60 cents per share in such time. There have been instances where stock prices have gone up by 500%, and some even to more than 1000% of their initial purchase value.

Before you go off to make stocks investment in companies listed on the Pink Sheets, it would be wise for you to study the disadvantages of doing so. The advantages mentioned earlier should be weighed against the risks