A Pink Sheet or Pink Quote is a list of stocks from Pink OTC Markets (hence the name) that lists most of what are called over-the-counter, or OTC, securities. Basically, these are less popular and/or lesser known than the stocks you see on the New York Stock Exchange (NYSE) or the Nasdaq. There are also a certain list of requirements that stocks and bonds need in order to be listed on the two major stock exchanges, and if a stock does not meet these requirements, then they are unable to be listed, and are instead put on these lists.
Contrary to what you may think, this is not a stock exchange in and of itself. A lot of the companies listed on these are in financial trouble, bankrupt, foreign interests, or “niche market” businesses. These companies are not required to provide financial information through the Securities and Exchange Commission (SEC), which means that they are not being monitored by the SEC. That makes it a bit nerve wracking for some people, but other people don’t see that as an important part of the investment process. That’s up to your opinion and how you feel about your investments.
The businesses that are listed on the Pink Sheets are considered to be high-risk investments. If you noticed the list of common reasons for being on the list, you can see why. Will they tell you not to invest in these companies? No. But always make sure that you do your research before you make any sort of financial decision, no matter how much or how little risk may be associated with it. Make sure that the company or companies that you are considering investing in are financially stable before you put any amount of money into them.
To help you make decisions, Pink OTC Markets has created two tiers of “upper-level” stocks on their lists: these are referred to as the OTCQX and the OTCQB market tiers. Both are used to make the businesses listed on them more visible, because they are businesses that would meet certain criteria for the NYSE and the Nasdaq, but do not meet all of them (thus disqualifying them from being listed). The businesses also have to be operating normally. The businesses placed on these tiers are not as high of a risk as other businesses on the Pink Sheet.