Pink Sheets and OTCBB

By: ispeculatornew
Date posted: 12.29.2006 (12:00 am) | Write a Comment  (0 Comments)

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I am going to write my first commentary about the most speculative stocks of all: stocks that trade on the pink sheets and on the Over The Counter Bulletin Board (OTCBB). For the most part these stocks should be avoided and if you do invest in them you should realize that you are basically just gambling.

Let’s start with pink sheet stocks. The vast majority of stocks that trade on the pink sheets are scams. I don’t even know why people are allowed to buy them. Most companies on the pink sheets don’t report financials to the SEC and some even make up their financial numbers. The most egregious companies will have no business at all.

There are a few legit companies that trade on the pink sheets though. Some foreign companies will trade their ADR (American Depository Receipts) on the pink sheets. Also, some companies will have a few bad quarters, get delisted, and end up on the pink sheets. However, it would be a waste of time to try to find a decent company on the pink sheets when there are plenty of good companies on the NYSE, Nasdaq, and American Stock Exchange.

Stocks that trade on the OTCBB are a step up from pink sheet stocks but for the most part they are also terrible investments. If you are going to look into these stocks make sure they are reporting their financials to the SEC and that they have their financials audited using GAAP (Generally Accepted Accounting Principals).

So why do people even invest (gamble) in pink sheet stocks at all. Well, they can be very volatile and they can make you a lot of money quick. There are tons of stock promoters and scammers that try to pump and dump these stocks for those very reasons. However, you can lose your money just as quick if you invest in these stocks. If you want to gamble you might as well go to a casino. At least there you might have some fun while you lose your money.

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