You had probably received a letter from an unknown email address claiming to pass on to you a secret market information regarding the rise in prices of a certain stock, and that you are one of the lucky possessors of this secret insider information.
You may probably take the bait and buy the stocks hoping to make a profit of over 50% on the market price of the stock and to your shock and consternation you discover that the company that floated they stock has already gone bankrupt and is trying to raise capital in this way.
Then it would be too late to cry over spilt milk or say wasted money.
No one will give you your money back.
Had you casually passed by this information considering it a useless spam or had you known about pink sheet stocks you wouldn't have probably taken the bait and become the butt of ridicule? Oops! I mentioned another jargon!! You may be probably wondering what actually these pink sheet stocks are.
Well this just might be your lucky article, better than your user modified encyclopedia available off the net.
Pink sheet stocks are those stocks that are floated by companies who do not meet the requirements of a stock trading company as required by NASDAQ or The New York Stock Exchange.
Hence, they release their quotations via an electronic quotation system, used for over -the-counter securities.
Earlier, these were actually released in pink slips or sheets and hence the peculiar name.
These listings would then be subsequently called penny stocks.
As is evident from the above information, there are things about the pink sheet stocks that make them inherently dangerous.
A company that doesn't periodically publish its financial statements cannot be trusted, especially in times of recession.
Companies without even a financial history can register themselves on these Pink Sheet listings which means that Pink Sheets is not a registered stock exchange and hence there are chances that here might be companies involved who try to raise capital which they otherwise might not be able to do via a registered stock exchange, failing to meet certain requirements.
Low cost of investment of these penny stocks lure a lot of people into buying them.
The veiled stock tips on emails and SMSes might be ploys by companies to raise their capital, which they were unable to do via a registered stock exchange.
For these reasons, it is necessary one consult an expert stock analyst before investing in pink sheet stocks.
Thinking that the risks are minimized because of the low prices of the stocks, they may invest quite an amount in these stocks but later they may incur such a loss that there would be no room left for grievances.
A company that has gone bankrupt or is heading towards financial disaster might use this strategy to try to salvage its situation a one last time but in the process take down with several hapless clients like a sinking ship.
Risks are a part of life and that's the truth.
Risks have a fifty chance of yielding high profits as well as extremely losses.
So if only you are in a financial position to lose your precious any money if any investment in the Pink Sheet Stock backfires, do so.
Or else back out.
Pink Sheet stocks are not for the small fishes.