Standout Stocks on the Pink Sheets > Some good companies don't want to meet the exchanges' listing requirements |
| I just learned that Arlen Corp., a stock I own, was
delisted from the Philadelphia Stock Exchange in 1996 and is now listed
on the pink sheets. What happened? Why would a company be listed there
rather than on one of the exchanges?—E. P., Maitland, Fla.
When the stock price of Arlen—an auto-parts maker—sank below the Philadelphia Stock Exchange's minimum price and asset requirements, it was bumped to the pink sheets, a list of over-the-counter stocks (including OTC Bulletin Board stocks) that aren't on Nasdaq. Most stocks listed on the pink sheets are thinly traded and often have a large spread between the bid price—what you could sell shares for—and the asked price—what you'd pay. Recently, you could have sold Arlen stock for a penny a share, says Deborah Castiglioni, CEO of discount brokerage Cutter & Co. But pink-sheet stocks aren't always speculative or has-been penny stocks. Some companies are listed there because they don't have enough outstanding shares to meet an exchange's requirements. For example, Kohler Co., the Wisconsin-based maker of upscale plumbing products has fewer than 10,000 shares outstanding, with each share selling for $119,000, according to Walker's Manual of Unlisted Stocks, which includes hard-to-get financial information on about 500 pink-sheet stocks (800-932-2922; $85 plus $6 shipping). Other companies, including some reputable foreign ones (such as Nestle, Nintendo and Deutsche Bank) are on the pink sheets by choice—they don't want to file the Securities and Exchange Commission documents or pay the fees required to be on an exchange. Or they "aren't particularly interested in having an active market for their shares," says Harry Eisenberg, publisher of Walker's Manual. Eisenberg looks for worthy stocks that institutional investors and analysts tend to ignore. Some of his favorites now include Smith Investment Co. (symbol SMIC, recent price $109), which owns almost one-third of A.O. Smith, a company listed on the New York Stock Exchange that makes electric motors and water-heating systems, and Adrian Steel (ADST, $251), which makes storage components for service vehicles. The pink sheets are published daily by the National Quotation Bureau. Most brokers subscribe to them. |
Lankford, Kimberly. 1998. Standout Stocks on the Pink Sheets. Kiplinger's Personal Finance Magazine, May, 56. |