Posted on 02 January 2011.
Publicly traded companies are classified on a range from micro cap stock to mega cap stock according to their market capitalization. Market capitalization refers to the total worth of a company’s stock shares. Companies that issue micro cap stock are those whose total market value is in the lowest category of value. Often, these equities are penny stocks. Sometimes they may trade for a few dollars or more.
Typically, you cannot find micro cap stock on the major exchanges. Instead, you will have to look for them in the over-the-counter market or among the pink sheets. The OTC market is for those companies that have not filed with the Securities and Exchange Commission. Filing with the SEC is a prerequisite for being listed on the major stock exchanges. That means the stock must list its availability and price elsewhere.
The OTC bulletin board acts like a formal stock exchange for these companies that could not or would not meet SEC requirements for filing. This electronic system gives users real-time quotes and information about volume, just as you might find on another site used for larger cap stocks. However, just because this interface appears like the NASDAQ or another exchange, it does not have all the authentic backing that the major exchanges have. You are responsible for protecting your investment here and do not have the fraud protection that you might get with an SEC-sponsored exchange.
Pink Sheets is a company that issues an electronic listing of micro cap stock. This is another good outlet for discovering the latest penny stocks available. However, Pink Sheets, like the companies that it lists, is not an SEC registered company and you must use your own discretion when buying micro cap stock through this medium.
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