The OTC equity market operates within a unique, often complex regulatory environment. While much of the securities industry focuses solely on federal laws and regulation, the companies, broker-dealers, investors and others comprising the OTC market must understand the impact of state “Blue Sky” laws as well. Continue reading “Understanding Blue Sky Laws”
Utah recently became the 25th state to recognize the OTCQX Best Market under its “Blue Sky Manual Exemption” for secondary trading. Just one year after Vermont first recognized OTCQX, reaching half of the 50 states marks a pivotal milestone in our quest to achieve national Blue Sky recognition. The addition of Utah followed recent recognitions from Delaware, West Virginia, Indiana and Maine. Continue reading “Set out on a journey and make your mark… OTCQX Blue Sky Recognition Expands to 25 States”
“The OTCQX Banks Index, a benchmark for community banks traded on the OTCQX market, gained 30 percent in the past 12 months, compared to 15 percent for the S&P 500. How can community banks leverage this positive trend and deliver greater value to their shareholders? Continue reading “Leveraging the high demand of Community Bank stocks”
In a previous blog post, I talked about some of the “pains” associated with a being an exchange-listed company today. Not only does it cost $2.5 million to do an IPO onto a U.S. exchange, it costs on average $1.5 million per year in legal, accounting, advisory and compliance costs to maintain an exchange listing, according to a 2011 study by the IPO Task Force. And that doesn’t include the value of management’s time and internal resources that are diverted to meet increasingly complex exchange rules and processes – and away from growing the business.
At OTC Markets Group, our goal is to remove the obstacles associated with being a publicly-traded company by reducing costs and complexities for business and investors. In this post, I outline the three ways we’re helping to take the pain out of being public:
- our data-driven market standards
- technology-driven information distribution
- broker-dealer-based trading model
“If we want growing companies to go public, we need our public markets to be a competitive source of growth capital. One easy solution is to let public companies sell their shares in the same way they can now buy them back: through brokers directly into their established public markets. Removing the outdated restrictions on selling shares publicly will lower the cost of capital and attract more growth companies to our markets.”
The SEC recently published a paper on OTC equity securities on their website. While I am always happy to see more research around OTC equities, I am surprised by the paper’s overly negative and misinformed conclusions about the growth in OTC dollar volumes.
Moreover, I am concerned that these flawed conclusions, drawn from outdated research and a study of a small group of securities subject to investigative requests by the SEC or FINRA, will be used to develop new regulations that harm capital formation. Regulatory action based on this skewed sample could negatively impact the vast majority of companies that trade successfully on the OTC Markets.
The OTC Markets are More Transparent Today
A key driver of the American economy is the capital formation process that fosters innovation and new enterprises. Entrepreneurs raise capital to grow their business, innovate and create jobs. For many smaller companies, the expectation is to conduct an Initial Public Offering (IPO) and list on a stock exchange – hoping to build liquidity and visibility, and ultimately, long term shareholder value. While these efforts are well-intention-ed, many companies today find themselves putting off the IPO because they do not want to be overwhelmed by the increasing management time commitment, red tape and costs associated with being a public company.
Which US Equity Market has the largest number of securities NOT considered Penny Stocks according to SEC Rule 3a51-1? Based on the location of this post, you should be able to guess…. but that should make it no less surprising. The numbers speak for themselves:
Number of Non-Penny Stocks*:
- OTC Markets: 3,188
- NYSE: 3,175
- Nasdaq: 3,170
*Data as of 9/30/16
While this may cause some to do a double-take, the data is totally rational to those who have followed the OTC Market over the past 10 years. A number of key developments have made OTC Markets the market of choice for quality international and U.S issuers: Continue reading “Don’t Be Pound Foolish”
Public venture markets play a vital role in fostering capital formation and driving growth for early stage companies. Just look at the London Stock Exchange’s AIM market, which since its launch has served over 3,600 venture stage companies, or the Toronto Stock Exchange’s TSX Venture Exchange that supports growing companies from the mining and energy sectors. Most recently, the OTCQB Venture Market in the U.S. currently provides over 850 entrepreneurial companies a gateway to public markets and an opportunity to electronically connect with investors. Continue reading “What it means to be a Venture Market”