Top 6 Requirements for Pink Sheets Stock to Upgrade to NASDAQ
Many investors are unclear on the requirements of Pink Sheets shares and how they can be upgraded to the NASDAQ. To list on NASDAQ, companies must meet strict standards including being registered with the Securities and Exchange Commission (SEC), acquiring at least three market makers for their securities, and maintaining minimum asset, capital, shareholder, and public share requirements. . Many companies choose to issue pink sheet penny stocks initially because the requirements to go from pink to NASDAQ are difficult or impossible to meet during the first few years of operation.
Here are the top 6 requirements for Pink Sheet stock to upgrade to a major stock exchange:
- Information requirements – To list on NASDAQ, companies that currently issue pink sheets must undergo strict SEC monitoring and reporting regulations. These disclosure requirements provide investors with a greater degree of confidence and serve as benchmarks for the company’s overall performance. These requirements are much more substantial than the listing requirements for pink listings on the OTCBB (Over the Counter Bulletin Board).
- Market makers – Typically, NASDAQ market makers deal with established companies and offer proven stocks to their clients. Emerging and declining companies may find it difficult to find market makers who meet the requirements to move from pink to the NASDAQ.
- Active – Companies that once listed shares on the NASDAQ may have the necessary asset levels, but may be unable or unwilling to provide the documentation required by the SEC to list on the NASDAQ. Some companies are delisted from NASDAQ on purpose.
- Capitalization – Pink sheet penny stocks generally do not meet NASDAQ’s capitalization requirements. Some startups can achieve this in a few years, but for many companies this is a long and complex process.
- Shareholders – Maintaining the required number of shareholders can be difficult for start-ups with limited investment opportunities and for companies that have had market difficulties in the past.
- Public Actions – The percentage of public shares vs. Preferred shares are an important element in determining whether a company is eligible for listing on the NASDAQ. The liquidity of those shares can also be a factor; If there is no real market for stocks, then companies generally can’t move from the pink-sheet-penny stock market to NASDAQ trading.
The pink penny stock market is more speculative than traditional stock markets and carries greater risk for investors. Pink-leaf penny stocks are generally issued by companies that currently cannot meet the requirements to go pink on the NASDAQ; this includes startups and high-risk companies. As a result, investing in the Pink Sheets Penny stock market must be balanced with lower risk investments in regular stocks and stocks.