Category: OTCBB

OTCBB: The OTCBB has become increasingly irrelevant in the OTC marketplace for years. In October 2010, I wrote a blog titled “Has the OTCBB been replaced by the…

Jan212014

Direct Public Offering or Reverse Merger; Know Your Best Option for Going Public

Introduction

For at least the last twelve months, I have received calls daily from companies wanting to go public.  This interest in going public transactions signifies a big change from the few years prior.

Beginning in 2009, the small-cap and reverse merger, initial public offering (IPO) and direct public offering (DPO) markets diminished greatly.  I can identify at least seven main reasons for the downfall of the going public transactions.  Briefly, those reasons are:  (1) the general state of the economy, plainly stated, was not good; (2) backlash from a series of fraud allegations, SEC enforcement actions, and trading suspensions of Chinese companies following reverse mergers; (3) the 2008 Rule 144 amendments including the prohibition of use of the rule for shell company and former shell company shareholders; (4) problems clearing penny stock with broker dealers and FINRA’s enforcement of broker-dealer and clearing house due diligence requirements related to penny stocks; (5) DTC scrutiny and difficulty in obtaining clearance following

Aug132013

SEC Updates May Benefit Equity Line Financing Providers and Issuers

On May 16, 2013, the SEC updated their Compliance and Disclosure Interpretations addressing the point at which an equity line agreement can be determined to be a completed transaction for purposes of filing a resale registration statement. 

Background

Equity line financings are transactions where a company has a long-term contract to put shares to an investor (the equity line provider) at a price, generally determined by a formula based on a discount to market price.  That is, the Issuer has the right to tell the investor when to buy securities from the Issuer over a set period of time and the investor has no right to decline to purchase the securities (or a limited right to decline).  Generally, the dollar value of the

Jun112013

OTC Market Group Has Modified Its Alternative Reporting Standard

Background

Over the past few years, the historical Pink Sheets has undergone some major changes, starting with the creation of certain “tiers” of issuers and culminating in its refurbished website and new URL, otcmarkets.com.Otcmarkets.com divides issuers into three (3) levels: OTCQX, OTCQB and Pink Sheets.

Issuers on the OTCQX must be fully reporting and current in their reporting obligations with the SEC and also undergo a quality review by industry professionals.Issuers on the OTCQB must be fully reporting and current in their reporting obligations with the SEC but do not undergo additional quality review.

Issuers on the Pink Sheets are not required to be reporting with the SEC.However, such issuers are then further qualified based on the level of voluntary information provided to the otcmarkets.com.Issuers with no information are denoted by a skull and crossbones, Issuers with limited financial and business information are classified as “limited information,” and Issuers that provide information as set forth in the OTC

May292013

The OTCQX And OTCQB Are Finally Recognized As “Established Public Markets” By The SEC

Back in October 2010 I wrote a blog titled “Has the OTCBB been replaced by the OTCQX and OTCQB”; at the time and up until May 16, 2013, my opinion was “yes” with one big caveat.  Prior to May 16, 2013, all three tiers of the OTC Link were considered “pinksheets” by the SEC staff.  Prior to May 16, 2013, the OTC Link was not considered a market and therefore: (1) there could be no at-the-market pricing of securities registered for resale by an Issuer on behalf of its selling shareholders; and (2) there could be no equity lines or similar financing transactions and no registration of underlying convertible equities which are priced based on a formula tied to the trading price (usually a discount to market), for OTC Link quoted securities.

On May 16, 2013, the SEC updated their Compliance and Disclosure Interpretations confirming that the OTCQB and OTCQX marketplaces are now considered public marketplaces for purposes of establishing

Jan042013

OTC Market Groups Has Modified Its Alternative Reporting Standard Effective January 3, 2013

Background

Over the past few years, the historical “pinksheets” has undergone some major changes, starting with the creation of certain “tiers” of issuers and culminating in its refurbished website and new url “www.otcmarkets.com”.  The www.otcmarkets.com divides issuers into three (3) levels: OTCQX; OTCQB and pinksheets.

Issuers on the OTCQX must be fully reporting and current in their reporting obligations with the SEC and also undergo a quality review by industry professionals.  Issuers on the OTCQB must be fully reporting and current in their reporting obligations with the SEC but do not undergo additional quality review.

Issuers on the pinksheets are not required to be reporting with the SEC.  However, such issuers are then further qualified based on the level of voluntary information provided to the www.otcmarkets.com.  Issuers with no information are denoted by a skull and crossbones, Issuers with limited financial  and business information are classified as “limited information and Issuers which provide information as set forth in the

Dec062012

An Update On Dealing With The DTC Following The SEC’s Ruling On International Power Group, Ltd.

Background

Back in October and November of 2011, I wrote a series of blogs regarding DTC eligibility for OTC (over-the-counter) Issuers.  OTC Issuers include all companies, whose securities trade on the over-the-counter market, including the OTCBB, OTCQB and pinksheets.  Many OTC Issuers have faced a “DTC chill” without understanding what it is, let alone how to correct the problem.  In technical terms, a DTC chill is the suspension of certain DTC services with respect to an Issuer’s securities.  Those services can be book-entry clearing and settlement services, deposit services or withdrawal services.  A chill can pertain to one or all of these services.  In the case of a chill on all services, the term of art is a “global lock.”

I have previously blogged on how to become DTC-eligible.  From the DTC perspective, a chill does not change the eligibility status of an Issuer’s securities, just what services the DTC will offer for those securities.  So while

Aug232012

The OTCBB – Nearly Extinct, OTCQB is the Micro-Cap Reporting Standard

For the past two years it had appeared that the OTCBB had been replaced by the OTC Link run OTCQB and the OTCQX. For all intents and purposes since the fall of 2010, the industry-wide proliferation of the OTCQB and OTCQX has marginalized the OTCBB to the brink of extinction. It is has now become incredibly apparent that the OTCQB is the new micro-cap reporting standard.

Background

Over the past few years the historical “Pink Sheets” and its online presence has undergone some considerable changes, starting with the creation of several well-defined “tiers” of issuers and culminating in a completely refurbished website and a new URL – www.otcmarkets.com; and new name for the Inter-dealer quotation system – the OTC Link.  The OTC Link divides issuers into three levels: OTCQX; OTCQB and Pink Sheets.  Quotation on both the OTCQB and OTCQX requires that the Issuer be subject to and current with the reporting requirements of the Securities Exchange Act

Jun192012

SEC Grants Accelerated Approval to FINRA Rule Amendment Regarding Minimum Quotation Size Requirements for OTC Equity Securities

On June 15, 2012, the SEC granted accelerated approval to an amendment to FINRA rule 6433 related to the minimum quotation size for OTC equity securities.  Rule 6433 applies to all market makers.  Rule 6433 sets forth the specific minimum quotation size requirements in tiers that are based on the price of the OTC equity security being quoted by the market maker.  In addition, the rule change will require market makers to publish customer limit orders.

The new rule amends and lowers the current 9 tier quotation size requirements to 6 tiers as follows:

  • $175.00 per share and above, the minimum quotation size would be 1 share;
  • $1.00 through $174.99 per share, the minimum quotation size would be 100 shares;
  • $0.51 through $0.9999 per share, the minimum quotation size would be 1,000 shares;
  • $0.20 through $0.5099 per share, the minimum quotation size would be 2,500 shares;
  • $0.10 through $0.1999 per share, the minimum quotation size would be 5,000 shares;
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Mar212012

DTC Chills, Due Process and Rule 22

Back in October and November of 2011 I wrote a series of blogs regarding DTC eligibility for OTC (over the counter) Issuers.  OTC Issuers include all companies whose securities trade on the over the counter market, including the OTCBB, OTCQB and Pink Sheets.  Many OTC Issuers have faced a “DTC chill” without understanding what it is; let alone how to correct the problem.  In technical terms, a DTC chill is the suspension of book-entry clearing and settlement services with respect to an Issuer’s securities.  In layman’s terms it means your stock can’t clear or trade electronically.  Since all trading in today’s world is electronic, it really means your stock doesn’t trade.

The SEC’s Stance

As noted in the SEC opinion:

“…DTC provides clearance, settlement, custodial, underwriting, registration, dividend, and proxy services for a substantial portion of all equities, corporate and municipal debt, exchange traded funds, and money market instruments available for trading in the United States.  In 2010, DTC

Dec162011

Private Capital Market Places – A Second Look

Last week I wrote a blog introducing, at least to me, Private Company Market Places (PCMP).  A PCMP is a trading platform, such as SharePost or SecondMarket that provides a market place for illiquid restricted securities, such as private company securities, 144 stock, debt instruments, warrants, and the like or alternative assets.  It is on a PCMP that Facebook’s shares currently trade and where pre-IPO Groupon and LInkedin received their trading start.

This week I reviewed some of the top PCMP players, including Gate Technologies, SecondMarket, Sharespost and Xpert Financial.  I have no affiliation, have never worked with and maintain no accounts with any of these PCMPs.

PCMP’s are Broker Dealers or Affiliated

Each PCMP is a licensed broker dealer or affiliated with a licensed broker dealer, that has either created or licensed an electronic trading board, available at their respective websites, which allows investors to view, buy, and sell otherwise illiquid, restricted or alternative assets.  These securities are