Pink Sheets – What Are They and Why Exactly Are They Called “Pink Sheets”?

To the investing outsider, the words “pink sheets” may conjure up images of bed sheets the color of Pepto-Bismol. However, in regards to the investing community, those two words mean something else entirely.  In reality, the pink sheets are a publication that is published on a daily basis that tells the bid prices and the ask prices of over-the-counter stocks. Over-the-counter stocks, or OTC stocks, are stocks that are not listed or traded on the stock exchange like other stocks are and, thus, do not have to meet any minimum requirements or file with the SEC.

You are probably wondering why these publications are called the pink sheets. The reason they are called such is because the publications were printed on pink paper. This made them stand out and people knew that they were looking at OTC stocks without having to look for an added symbol at the end of the stock name. However, it is rather easy to find a company on the pink sheets because they have the stock symbol “.PK” at the end of their stock name.

The Pink Sheets have several different market tiers:

  • OTCQX – This is the top tier. It is generally reserved for the companies that have met certain financial standards and have had a qualitative review.
  • OTCQB – Companies on this tier provide significant disclosure of their financial information to the public, though not enough to grant them trade on a stock exchange.
  • OTC Pink – The third tier that has absolutely no disclosure or financial requirements at all. The companies themselves decide how much to disclose to the public and investors.
  • Current Information – These are companies that have given information to the Pink Sheets within the past six months.
  • Limited Information – These are the companies that either cannot or will not meet the standards for providing current information to the organization. These companies have let some information be known, but not all.
  • No Information – These companies provide absolutely no disclosure to the public about their business.
  • Caveat Emptor (Buyer Beware) – These companies have a public interest concern associated with them and may have their stocks blocked.

Since the Pink Sheets do not require companies to meet any minimum requirements like the regular stock exchange does, most of the companies that are listed on them are rather small in both size and revenue. Stockbrokers tend to view the Pink Sheets as a list of companies that are very high-risk and all who seek to invest in them should do a lot of research into the company before putting any of their money into it. The way the economy is going, you can never be too careful with your money when you are looking to make investments.

About Richard Wilson