Reverse Merger (II)

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Reverse Merger (II)

Analysis of NASDAQ, OTCBB and Pink Sheet

One of the disputes over reverse merger is that, some intermediary organs mix up the concepts of NASDAQ, OTCBB and Pink Sheet in US stock market. Simply, the companies listed in OTCBB can be upgraded to NASDAQ for transaction. It seems the relation between OTCBB and NASDAQ is very close, and somebody even claims that OTCBB is the secondary market of NASDAQ, and companies will be easier to come to NASDAQ after having been listed in OTCBB.

As a matter of fact, NASDAQ and OTCBB are two independent trading systems, with some similarities — originating from the overthecounter (OTC) market, under the control of NASD, and have no interrelation. OTCBB is a quotation medium for subscribing members, and has no standard for listing, nor the implementation system for automated trading. The obligations undertaken by market specialist of OTCBB are different from that of NASDAQ. The listing threshold of OTCBB is very low, so the companies listed in this market are generally hard to attract the large funds and institutional investors in the beginning. The investors of OTCBB include the boutique funds or individuals in generally, and are stronger if being exposed to risks. Pink Sheet is a trading market with its level lower than that of OTC trading market. Those listed companies not complying with the continuous listing requirements of NASDAQ will be degraded to the Pink Sheet after their trading at NASDAQ has been suspended. The liquidity of stocks in Pink Sheet is poorer.

OTCBB boasts more shell resources although the companies listed here are at different levels. SEC tends to regulate OTCBB more tightly, and many companies listed here are willing to declare and register as required and so it is easier for and favorable to those companies ready for going public through buying a shell. Some private Chinese enterprises boast the proud strength, but it will take them more time and higher cost to buy a shell at NYSE or NASDAQ. In such case, it will be a proper strategy for such private enterprises to
go public in North America by means of the shell resource of OTCBB, and then to look for greater chances for financing. Although OTCBB is poorer in financing capability, the companies with strength and bright prospect can raise a certain amount of fund by means of other methods. Actually, some famous companies used to go public in OTCBB and then in NASDAQ or NYSE, such as Microsoft.