In years gone by when the market wasn't as regulated as it is now, buying anything except on the big board was a fast way to loose your money. Companies could buy a publicly trading shell, hype it to the moon, and then sell right into the hype, leaving you with stock certificates that were only good for wall papering your bathroom. But this is a much cleaner market nowadays, so "all" pink sheets aren't off the table now.

Yet that doesn't mean there isn't risk. What it does mean however is that some companies simply haven't done the necessary things needed to get listed on the Nasdaq National market,or the NYSE. (or Amex for that matter). Look at Samsung. We really do believe that Samsung has changed itself from a pretty lousy copy cat tech company into one of the strongest electronics brands on earth now. They've won multiple awards for innovation and they are no longer the laughing stock of Asian manufacturers. Yet guess what? They have no listing on they NYSE, they don't have an ADR, they aren't even on the NASDAQ National market. The only way to buy them here is on the "pink sheets".

This is also true of a lot of Canadian companies that are listed on the Toronto exchange, but haven't done the necessary work to be listed here on a big exchange. For example, ATS Automation tooling is a pretty big auto parts supplier and consulting company. They trade as ATS on the Toronto exchange. yet if you want to buy them here, you have to use the "pink sheets" under the symbol ATSAF.PK.

Yet there is indeed still risk. The pink sheet companies aren't regulated by the NASDAQ like the National listed companies. It's often harder to find info on them, and they are often very very "liberal" with their statements, bordering on and even including bald faced lying. They can get away with it because they are all expected to "police themselves" and they do a pretty fair job overall, but there's always the wise guy.

The problem however, is how do you separate the good from the bums? That's not always easy. Let's say you and cousin Joe open a business. It's doing really quite well, and you want to become public but the big institutions won't even return your call. Goldman, and Lehman simply don't think you're "google" material so to speak, so they ignore you. It's companies like this, that often either do an IPO, or buy into a shell or what have you, trade on the pink sheets, and then hopefully the performance is good enough that one day they can indeed go the next step and become a more "mainline" company.

We are not against buying pink sheet companies, especially if the parent company is actually pretty large in it's "home town" or homeland". But be very careful of say Joe and Becky's consulting group however. Who's Joe? Who's Becky? Is there really a company or just a paper shell? Do your homework and you'll be fine, just don't fall for the hypsters claims.