Last updated: 15 November 2016
Penny stocks are not just the domain of the OTC and Pink Sheets markets. There are hundreds of penny stocks list on the Nasdaq exchange (as well as AMEX and NYSE for that matter).
After all, “penny stocks” is really just a phrase generally used for stocks trading under a certain dollar threshold (under $5 for example).
The major exchanges have listing requirements which in some cases can allow penny stocks to be included on their exchanges. If the SEC standard of $5 per share or lower is applied then there are many NYSE and NASDAQ penny stocks to choose from with the advantage of greater financial transparency and newsworthy reporting. The NYSE and the NASDAQ each have different initial and ongoing listing requirements. The NASDAQ Stock Market is divided into 3 tiers:
Each NASDAQ tier has initial listing and ongoing listing requirements. Initial requirements are the requisite standard that need to be met for a company to list on the exchange. The initial listing can be an initial public offering, often referred to as an IPO, or in other cases the initial listing will come from a company moving from a less regarded listing service such as the OTC Markets or OTC BB.
A company’s quarterly report is a common example of an event that occurs to meet the reporting requirements set by the major exchanges like the NYSE and NASDAQ. This is an event that is known to occur at a regular interval and it usually happens around the same time (e.g. one month after the end of the quarter). However, with penny stock investing all too often investors do not receive timely quarterly reports. Penny stock companies listed on the OTC Markets and OTC Bulletin Board do not have the same reporting requirements as companies listed on the major exchanges. This makes it particularly hard for investors to make good decisions with little or no information. In contrast, companies on the NASDAQ have much higher reporting requirements as summarized in this quote from the Continued Listing Standards document under the Disclosure of Material News section:
“Companies listed on The NASDAQ Stock Market are subject to regulations regarding the disclosure of material news. “Material news” is information that would reasonably be expected to affect the value of a company’s securities or influence investors’ decisions.”
The table below summarizes the ongoing listing requirements for NASDAQ traded stocks for minimum bid price, requirement for disclosure of material news, and public market value. As can be seen in the table it is rather easy to maintain a listing on the NASDAQ and along with trading on the NASDAQ investors get the assurance of timely news and disclosure of material facts.
NASDAQ Global Select Market
& NASDAQ Global Market
|Minimum Bid Price||$1.00||$1.00|
|Disclosure of Material News||Yes||Yes|
|Minimum Public Market Value|