Penny stocks are sometimes highly profitable. A penny stock can shoot from let's say $0.05 to over $250 in a matter of few days when the company listed on Pink Sheets graduates to OTCBB, NASDAQ or even NYSE. Some companies start from these Pink Sheets and eventually reach OTCBB, NASDAQ and NYSE. So what are these Pink Sheets? This small but exciting market is like the Wild West of the 19th century with no rules and not much oversight. If you want to invest in penny stocks that first you need to do your research right. If you get your research right, you can hit upon a hidden gem listed on these Pink Sheets that can make you rich! Companies traded on Pink Sheets do not have to file financial statements and do not even have to issue an annual report even. Most of these companies are happy being listed on the Pink Sheets and do no plan to move on to the Over the Counter Bulletin Board (OTCBB). Many even may don't have ongoing operations. You might be thinking that most of the companies that get traded on the Pink Sheets are just mom and pop shops posing as companies. This market is infact home to 20,000 stocks. For one reason or another, these companies have chosen to stay on the Pink Sheets. The reason for this can be the company's desire for privacy. Getting listed on OTCBB may cause a loss of privacy for these companies as SEC requires to know exactly how each executive is being compensated and how the company owns assets. Now most of these companies that are listed on Pink Sheets are in their startup phase meaning they don't won't to divulge much to the market. Since most of them are embarking on a new business venture, they want the market to keep on guessing. Telling the market everything at this stage can be detrimental to their future prospects. But this lack of information about these companies makes many investors nervous about them and forces them to stay away from investing in Pink Sheets Penny Stocks. To make matters worse, many market makers charge wide spreads on Pink Sheets. It is not uncommon for a penny stock on Pink Sheets to have a bid of $0.05 and an ask of something like $0.2-0.25. This happens when the market maker feels that the market for the stock is thin. The market maker does not want to buy a stock only to be stuck with it for a long time waiting for a new buyer to show interest. This wide spread is a way to discourage buyers away from this penny stock. However, many pink sheets stocks have a spread of less than one cent so it pays for an investor to take the Pink Sheets seriously. Most of the stocks that trade on pink sheets have been beaten down so far in price that they trade below their book value. So savvy investors know that they can find a good penny stock on pink sheets. Do good due deligence and research before investing in pink sheets stocks!
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