OTC MARKETS: Which exchange is best for you?

Posted by on May 17th, 2016

I was recently speaking with a company looking to list on a U.S. exchange and was asked the question, “Which exchange should we list on?” The company certainly did not meet the specific requirements to list on the NASDAQ or the NYSE/NYSE MKT so I suggested they list on one of the OTC exchanges. “Ok, which OTC exchange should we list on,” was the reply from the management team.

OTC Markets has three tiered marketplaces in which a company can list on, OTCQX, OTCQB and OTC Pink. There are roughly 10,000 large-cap to micro-cap companies that trade their stocks/ADR’s on these three exchanges representing 3.6 billion in share volume. Companies listed on the OTC Markets include Adidas AG (OTCQX: ADDYY), Airbus Group SE (OTC Pink: EADSY), Fannie Mae (OTCQB: FNMA) and Roche Holdings (OTCQX: RHHBY), If you were to list your company on one of these exchanges, which one would you pick?

The OTCQX is the highest tier among the three. It is for companies who meet and maintain high financial standards, are compliant with U.S. securities laws, must be current in their disclosure, and are sponsored by a professional third-party advisor whether that be an attorney or an investment bank. There is a high level of visibility for companies listed on this exchange as OTC Markets provides an OTCQX CEO Video Interview series on the homepage of its website with a different OTCQX CEO each month and OTCQX even offers real time quotes on its listed companies.

The OTCQB is the next tier of the three and is for entrepreneurial and development stage U.S. and international companies that are unable to qualify for the OTCQX. Companies must be current in their reporting and undergo an annual verification and management certification process. Companies must also meet a bid price of at least $0.01 and cannot be in bankruptcy.

The OTC Pink is for all types of companies that are in default, in distress or provide limited to no information on their company. All OTC Pink companies are recognized under certain designations: Current Information, Limited Information and No Information. Companies designated under Current Information provide periodic disclosure filings based on the foreign exchange they may be listed on. Companies listed under the Limited Information Yield sign have financial reporting problems, economic distress, or are in bankruptcy which limits the information they can provide.  A company recognized as having No Information is self-explanatory. It indicates that a company cannot or will not provide the necessary disclosure information to the SEC or OTC.

In order to determine which exchange is best suited for your company, I would recommend discussing with your team including your SEC attorneys, IR counsel and an OTC Markets representative as each exchange has its own benefits. You may even want to reach out to companies that are listed on these exchanges to get their opinion as well. If you are wondering how to connect with OTC listed companies, there will be plenty of opportunities to see and hear them present over the next few weeks namely the Marcum Conference in New York June 1st and 2nd as well as the LD Micro Invitational June 7th through the 9th in Bel Air, CA. For more information on the OTC Markets, feel free to visit www.otcmarkets.com.