Business, Legal & Accounting Glossary
Pink sheets is a listing of over the counter securities maintained by a broker.
The Pink Sheets is an electronic quotation system that provides price and other financial information for the over-the-counter securities markets. The company was founded in 1904 as a quotation service, originally printed on pink sheets of paper. Today, it is published by Pink Sheets, LLC, a private company. The Pink Sheets does not have any listing requirements for the companies that it quotes. The companies listed on the Pink Sheets are almost all very small and thinly traded and do not meet the listing requirements of the Nasdaq, the leading over-the-counter market. Also, a great many do not file audited financial statements or periodic reports. Companies quoted in the Pink Sheets thus tend to be risky ones to invest in.
Stocks that trade over the counter and not on an exchange are called pink sheets because they were originally listed on pink paper. Today, this is the home of companies too small or not meeting the requirements of major exchanges such as the NYSE.
However, Fools should generally steer clear of these, because it is also the home of companies not worth the pink paper their names used to be printed on. Penny stocks abound; companies with no revenue abound; companies with no product abound, even. And, unfortunately, so does a lot of hope and emotion.
For some reason, the idea of owning thousands of shares does something to people’s brains. Those shares could be worth 10 cents each, but, hey, I’ve got 10,000 of them! Watch out baby! All it has to do is go to $1 and I’ll have made $9,000! How cool is that?
Except, if the company has a vision only and no product, what exactly is going to be the catalyst that causes the stock to increase? Besides a pump and dump scheme, that is?
Fools, except for the one exception noted below, (keep reading) stay away from pink sheet stocks. You can get just as much excitement and actually have a better chance of winning some money by going to your local casino.
Some foreign companies wish to have their shares available to U.S. investors, but do not wish to go through the regulations and paperwork required of having their shares traded as American Depositary Receipts or American Depositary Shares. These companies, like Nintendo or BMW, are legitimate companies with real products and real sales and income. They might make a decent pink sheet investment. But not the rest.
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This glossary post was last updated: 6th August, 2021 | 0 Views.