What Is The OTC Bulletin Board?
In the land of investing, the OTC Bulletin Board (OTCBB) represents a region of high risk. People who play this market, according to mainstream investors, are basically gambling. This is not the view of all investment professionals, however.
Defining the OTC Bulletin Board
Stocks on the OTC Bulletin Board come from companies which must submit a financial report to a banking or insurance regulator. They are regulated by the Association of Security Dealers (NASD) and post values of stocks in real time. They also list volume of stocks, closing prices, and more.
How is the OTC Bulletin Board Different from NASDAQ?
There are various stock exchanges, which any financially curious person will know just by watching the daily news. Names such as NASDAQ and the New York Stock Exchange (NYSE) represent the big players. The OTC Bulletin Board is a minor player in this field.
One reason is that these exchanges have strict rules about companies which get posted here. Firms which are too small or too unstable will not end up on a major exchange, and few companies ever do make the jump from OTCBB to NASDAQ.
How Has the OTCBB Changed?
Less than 15 years ago, the OTCBB was a wholly unregulated exchange where anything could happen, and often did. Today, there are still exchanges (such as the Pink Sheets) where firms listed do not have to report their financial situation. Investors really are taking risks when they buy into these companies.
What is Good about Investing with the OTCBB?
Some people say there is nothing good about these uncertain companies with their minor company portfolios and small annual sales when considering investment strategy. Others suggest that there is money to be made wherever there is instability. For instance, a reliable but slow moving stock will earn dividends, but these will not amount to much in the short term. With a company from the OTC Bulletin Board, fortunes can change in a day. From being worth a million in the morning, their value can double by supper time. Of course, this is not as likely to happen as, say, gaining a few dollars or even watching a company declare bankruptcy, but the fantasy can be realized here.
The kinds of companies you will see on the OTCBB include fitness firms, health food companies, small consultancy firms and startup businesses. Companies here are not established enough to have a resume to offer investors. Remember, though, that the OTC Bulletin Board is regulated, providing at least some protection.