Major exchanges such as the NYSE and Nasdaq have strict requirements in terms
of the market capitalization of a company, company assets, trading volume and
value, and pre-tax earnings. Smaller companies are essentially shut out from
the benefits of these public stock exchanges.
The dramatic growth of Over-the-Counter services, fueled by sophisticated
online trading capabilities, has created active markets for investments in
small cap companies and democratized access to these securities by private
investors seeking to trade in these securities.
The
OTC Bulletin Board® (OTCBB) is a regulated quotation service that displays
real-time quotes, last-sale prices, and volume information in over-the-counter
(OTC) equity securities. Approximately 3,300 securities are traded on the OTCBB.
An OTC equity security generally is any equity that is not listed or traded
on NASDAQ or a national securities exchange. To be eligible for quotation on
the OTCBB, issuers must be fully reporting of financial statements and remain
current in their filings with the SEC or applicable regulatory authority.
The
Pink Sheets is another important avenue open to small and mid-cap companies.
Companies are not required to register securities with the Securities and
Exchange Commission (SEC), or be current in their reporting requirements
to be quoted on the Pink Sheets. However, a number of recent initiatives
by the Pink Sheets has resulted in more extensive reporting requirements
for companies in a number of situations; including most situations where
private companies are going public, or merging with an existing shell company.
