Pink Sheet Stocks: What You Need To Know

Larry Davidson - November 29, 2017

Pink sheet stocks are stocks that  trade on the over-the-counter market.  They trade like normal stocks; however, they do not need to meet minimum requirements or file with the SEC.

In other words, many companies who trade as over-the-counter pink sheet stocks (sometimes referred to as penny stocks) are in a developmental stage. A pink sheet has zero financial requirements, no shareholder approval rules, and they are not required to maintain an audit committee.

If you decide to trade pink sheet stocks: buyer beware.

pink sheet stocks

Of course, that doesn’t mean that trading pink sheets doesn’t offer opportunity… because they do. You just have to do more homework because it’s sometimes hard to find information some of the pink sheets listed.

pink sheet stocksHowever, that shouldn’t discourage you from exploring this side of trading.  For example, Omni Global Technologies, Inc (OTC: OMGT) was trading under a nickel per share in the beginning of November. On Nov 24, it closed at $14.20.

That’s a gain of over 45,000 percent in about 3 weeks. In other words, $1,000 investment would have turned to over $450,000. With profit potential that high, this is not any area of trading you should ignore.

Hive BlockChain Technologies (OTC: PRELF)  was trading sub penny in 2016. Earlier in November it traded above $5 per share.  $1,000 could have gotten you 100,000 shares and six figures profit in about year and a half.

Are these stocks a pump and dump? Or are they legit?

Better question.

Does it even matter?

You see, if you are trading, you just want to catch the move.  You are not looking at the company through the eyes of an investor. However, one  thing this is very real, and that’s the returns that can be made trading OTC pink sheets.

Best Brokers For Trading Pink Sheets: Who Are Some Brokers That Let You Trade Pink Sheets?

TD Ameritrade

They offer $6.95 per online equity trade. Their trading platform also offers research, scanning, filtering and charting tools. They also offer free education and support.

The minimum to open an account with them is $2,000.

Interactive Brokers

They offer two commission structures, a fixed rate and tiered rate. One rate structure is set up where you pay $1 per 100 shares.  The minimum account size is $10,000.  They also offer a lot of different types of trading platforms and some that are used by pro traders.

E Trade

They offer $6.95 or less per equity trade. They offer three platform types, including a mobile app. It’s unclear what their minimum account size is.

Charles Schwab

They offer $4.95 per online equity trade. The minimum account size to get started is $1,000.

No Pink Sheet Stocks On Robinhood

One stock broker that has caught a lot of buzz over the last couple of years has been Robin Hood. It’s popular among young people because they don’t charge any commissions. However, the platform is very basic and they don’t offer pink sheet stocks.

In terms of commissions and fees most brokerage firms are inline with each other. Trading pink sheets through them is not difficult. A more important factor should be the platform, how fast you’re able to execute and how smooth the platform runs. Most brokers offer paper trading accounts, a great way to test out a trading platform before committing real money to a broker.

Make Sure To Read The Labels

You can find more about pink sheet stocks by visiting the OTC Markets website. They label stocks to help inform investors.

For example:

Current Information: Companies listed here when they follow the International Reporting Standard, requiring the company to be listed on a Qualifying Foreign Exchange that requires periodic disclosure filings, or by following the Alternative Reporting Standard by making filings publicly available through the OTC Disclosure & News Service pursuant to the Pink Basic Disclosure Guidelines.

Limited Information: These companies have financial reporting problems, economic distress, or in a bankruptcy to make the limited information they have publicly available.  Companies in this group have limited financial information not older than six months available on the OTC Disclosure & News Service.

No Information: These companies are not able or willing to provide disclosure to the public markets. This group includes firm’s that are defunct and have ceased operations.

Caveat Emptor: The OTC Markets mark firm’s under this label as buyer beware. They maybe affiliated with a spam campaign, stock promotion, criminal or fraudulent activity.

Grey Market: These firm’s are not currently trading on the Pink markets.

As you can see, there are different groups of pink sheets. Some firms are willing to provide investors and the regulators the proper information to make investment decisions. However, some don’t comply all the way. Make sure to identify which category the pink stock is in. And don’t forget to conduct your own due diligence.

Want to know what the next pink sheet to go is? On occasion we come across some gems that we share to our subscribers. If you’re not a subscriber, sign up to our free newsletter. Fresh ideas delivered straight to your inbox.

Larry D. is one of the most experienced writers at the Dork. His expert insights into the individual stocks have made small fortunes for some of his readers and profitable trades for many more. Best known for his work with under-the-radar growth stocks, Larry has been picking winners for over 30 years.

Leave a Reply

Your email address will not be published. Required fields are marked *