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OTC Markets Blog

Stock Promotion – Context, Concerns & Potential Solutions

There is an adage that stocks need to be sold by having their stories widely told.  This is especially important for smaller companies looking to promote themselves to customers and build their visibility with the investment community.

Social networks and online media sites have created new ways for public companies to interact and connect with potential investors.  Digital marketing has made it easier for investor relations professionals to reach millions of investors with the click of a mouse, but it can also be abused by anonymous market manipulators for fraudulent promotional campaigns. Continue reading “Stock Promotion – Context, Concerns & Potential Solutions”

How Can We Take the Pain Out of Being Public? Part II

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:

  1. our data-driven market standards
  2. technology-driven information distribution
  3. broker-dealer-based trading model

Continue reading “How Can We Take the Pain Out of Being Public? Part II”

Let Public Companies Sell Shares in the Public Markets

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 Removing the outdated restrictions on selling shares publicly will lower the cost of capital and attract more growth companies to our markets.

Continue reading “Let Public Companies Sell Shares in the Public Markets”

Addressing the SEC White Paper on OTC Equities

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

Continue reading “Addressing the SEC White Paper on OTC Equities”

Understanding Blue Sky Laws

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”

Why pay-to-play research and marketing makes sense for ‘smicrocaps’

By David Collins, IR Magazine |  Tackling the challenges faced by small and micro-cap companies.

Life as a small or micro-cap public company is getting harder by the day as the pool of buy-side interest is shrinking almost as fast as sell-side research, and sales and capital markets sponsorship is contracting. Accordingly, the ‘smicrocap’ IRO’s task of finding worthwhile targets to pitch and introduce to management also grows more challenging – and, unfortunately, the smaller you are, the harder your job has become.

Continue reading “Why pay-to-play research and marketing makes sense for ‘smicrocaps’”

How Can We Take the Pain Out of Being Public?

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.

Continue reading “How Can We Take the Pain Out of Being Public?”

Don’t Look Now: You’re Public

Recently, at a Crowdfunding conference in L.A., I met with three company CEOs all in the process of doing Reg A+ deals.  When I asked them about their plans for secondary trading, I was surprised by the answer.  All three responded with some variation of “we don’t plan on going public – we will just issue the shares, there won’t be a market.”  Upon returning home I found another company advertising in GQ magazine offering shares for their Reg A+ deal.  In the Risks and Disclosure section of their Reg. A+ materials I came upon this statement: Continue reading “Don’t Look Now: You’re Public”

Shell Game

During conversations with compliance and risk departments over the past year, the topic of shell companies always comes up.  For diligent compliance officers the reason for this focus is obvious, shell companies and more specifically trading with their affiliates are noted specifically in key notices and regulations, including:

  • FINRA Regulatory Notice 09-05 – Unregistered Resales of Restricted Securities: Shell company status at the time of issuance is noted specifically as a red flag.
  • Office of Compliance Inspections and Examinations (OCIE) Alert October 2014 – Broker Dealer Controls Regarding Customer Sales of Microcap Securities: The alert noted that companies with nominal assets and low operating revenue should be a consideration when considering whether to file a Suspicious Activity Report (SAR).
  • Rule 144 – Specifically bars the use of the 144 safe harbor for securities issued by a shell company or former shell company[i].

Continue reading “Shell Game”

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