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You always read that the OTC market is not serious and you should not invest in companies which are listed on such markets.

But what about companies, which are listed there as well as on the Toronto Stock Exchange?

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    Could you expand upon "not serious"? Might you perhaps mean something with respect to size, prospects, growth, capitalization, disclosure, etc.? (as opposed to "they're joking around" :) – Chris W. Rea Jan 13 '16 at 13:44
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    I question your premise about OTC. I see you clarified some after the question by @ChrisW.Rea, but I still find your logic hard to follow. Companies on OTC are generally smaller (although there are exceptions even to that), but I'm not clear where I would "always read that the OTC market is not serious". – user32479 Jan 13 '16 at 15:13
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    And by "TSX", do you mean the regular TSX, or the TSX Venture Exchange? Is the particular OTC security you are asking about cross-listed to the former, or latter? – Chris W. Rea Jan 13 '16 at 16:23
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    Sudden drops for "no reason" are always possible no matter where a company is listed. – Zach Lipton Jan 13 '16 at 21:12
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    It is from my understanding that most if not all OTC securities are regulated one way or another by the SEC. But since these securities are extremely volatile, that is where you might assume that they are not "serious". – NuWin Jan 14 '16 at 0:04
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The assumption that companies listed OTC are not serious is far from the truth. Many companies on the OTC are just starting off there because they don't meet the requirements to be listed on the NASDAQ or NYSE. Major stock exchanges like the NASDAQ and the NYSE only want the best companies to trade on their exchanges.The NASDAQ, for example, has three sets of listing requirements. A company must meet at least one of the three requirement sets, as well as the main rules for all companies. These include:

  1. Each company must have a minimum of 1.1 million publicly-traded shares upon listing. Shares held by officers, directors or any beneficial owners of more then 10% of the company do not count.
  2. The minimum bid price of the stock upon listing must be at least $5.
  3. Companies must also have at least 400 shareholders holding at least 100 shares each.

Now don't assume that the OTC doesn't have rules either, as this is far from the truth as well. While there are no minimum level of revenue, profits or assets required to get listed on the OTC there are requirements for audited financial statements and ongoing filing and reporting to the SEC and NASD. Additionally there are several different levels of the OTC, including the OTCQX, the OTCCB and the OTC Pink, each with their own set of requirements. For more information about what it takes to be listed on OTC look here: http://www.otcmarkets.com/learn/otc-trading

A company deciding to trade on the OTC is making the decision to take their company public, and they are investing to make it happen. Currently the fees to get listed on the OTC range from $30,000 to $150,000 depending on the firm you decide to go with and the services they offer as part as their package. Now, I know I wouldn't consider $30K (or more) to not be serious money!

When I looked into the process of getting a company listed on the TSX the requirements seemed a lot more relaxed than those of the major U.S. markets as well, consisting of an application, records submission and then a decision made by a TSX committee about whether you get listed. More information about the TSX here: http://apps.tmx.com/en/listings/listing_with_us/process/index.html

I think the way that the OTC markets have gotten such a bad reputation is from these "Get Rich on Penny Stock" companies that you see pumping up OTC company stocks and getting massive amounts of people to buy without doing their due diligence and investigating the company and reading its prospectus. Then when they loose a bunch of money on an ill-informed investment decision they blame it on the company being an OTC stock.

Whether you decide to trade the OTC market or not, I wouldn't make a decision based on how many exchanges the company is listed on, but rather based on the research you do into the company.

  • thank you, very informative. Yes I know, research is very important, but I think if a "company" is willing to make big money on OTC without any real product, it´s not that hard to build up a complete fake presence in the internet, therefore I was looking for a general rule like OTC alone - not serious, but OTC and TSX - trustful, because TSX is more regulated – Marian Klühspies Jan 13 '16 at 17:56

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