Tier One Pink Sheet companies can offer high returns on investments since they are legitimate companies that once traded on a major exchanges but are now trading on the Pink Sheets. Some of these companies choose to voluntarily migrate to the Pink Sheets to reduce expenses associated with listing fees, while others (often coined as Fallen Angels) may have been forced to de-list because they did not meet listing requirements precipitated by a scenario of weakened financials. They can typically be investor-friendly by issuing press releases, publishing financials and providing routine updates on business operations.
Generally, investors are told to avoid Pink Sheet stocks. However, during the GeoTeam’s combined 50+ years of participating in the equity markets, Pink Sheet companies have offered high returns on investments. The Pink Sheet venue offers a great opportunity to identify companies that are selling well below their valuation, supported by their fundamentals. This can be a truly inefficient market that gives non-professional investors an opportunity to take advantage of this valuation gap.
Tier One Pink Sheet Stocks Can Offer High Returns on Investments
In the end, investors can get high returns on investments by playing in a market that many other investors, including institutional investors, often ignore.
Specific companies that end up on the Tier 1 list are often companies emerging from chapter 11 bankruptcy. These chapter 11 companies are classic Fallen Angels that often reemerge as stronger companies, ripe to grow earnings and present themselves as an opportunity to get high returns on investments.
Many Tier 1 Pinks also become acquisition targets. GeoInvesting has been involved in several investments that got taken over, offering an attractive premium and ultimately successful call.
Of course, there are risks to trading in these stocks, including the existence of small floats and lack of liquidity.
As opposed to Tier 1 pink sheet stocks, pump and dump stocks are speculative companies whose stock prices are generally getting pumped. Pump and Dump stocks often revolve around hyped stories that might attain a cult following. See more on pump and dumps.