Trading on Pink Sheets

Wednesday, January 31, 2007

For companies looking to go public, the New York Stock Exchange isn't the only game in town. Southern Home Medical, a new publicly traded company that has begun rolling up independent HME providers, trades on Pink Sheets ( Never heard of Pink Sheets? Balaji Gandhi, an analyst with the New York-based investment firm Oppenheimer & Co., clued us in recently.
HME News: What's the difference between the New York Stock Exchange and Pink Sheets?
Balaji Gandhi: For your major exchanges--the New York Stock Exchange, the NASDAQ, the American Stock Exchange--there are listing requirements. They can be everything from how big you are, in terms of your market value, to how many shares you have to trade every day. Usually, if a company trades on Pink Sheets, it has public shareholders, but it doesn't meet the requirements of the other exchanges. But for all intents and purposes, it's a publicly traded company.
HME: What types of companies end up on Pink Sheets?
Gandhi: Usually two types of companies. The first, which I think is the case with Southern Home Medical, is smaller companies. It's an easier way to get listed. The second is larger companies that run into regulatory trouble. Let's say you can't put out your regulatory fillings--your 10-Qs and 10-Ks. That would be one of the things that would kick you out of one of the major exchanges. Rotech has been on and off Pink Sheets over the years, because of their inability to hit their filings.
HME: Do companies listed on Pink Sheets attract the same investors?
Gandhi: You get a lot of the same investors, but some investment funds and mutual funds aren't allowed to invest in companies on Pink Sheets. That's really the only distinction.
HME: Do they shy away from companies listed on Pink Sheets because they're a riskier investment?
Gandhi: They are more risky. They want to invest in companies that are regular filers.
HME: Do some companies move on from Pink Sheets to other exchanges?
Gandhi: As they grow, some do.