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Penny Stock Investors
A large amount of penny stock investors have a dream that their much-loved stock will one day make the jump to the NASDAQ, AMEX or NYSE. There have been more than a few times when we have heard people say that they are going to hold their stock until it reaches the NASDAQ, and that it would be worth $200 per share! Just for grins, we, in recent times cruised the bull boards to find some posts for validation. It did not take very long to find such a place. Dizzy XXX proudly predicted for the whole planet to hear, he said that once they got to the AMEX their PPS would take off like a rocket! JDXXX Trader mentioned that once they listed on the AMEX, mutual funds and institutional investors would jump in. AMEX was a QUANTUM LEAP from the OTCBB! All right, let's get real people. What is the underlying principle behind this thinking?
Does this mean that your investment will yield larger returns just for the reason that your stock makes a leap to the major leagues? Better yet, what is the possibility of an over the counter stock actually graduating to a bigger exchange? To answer these questions, we analyzed OTCBB records from October 2004 to October 2005 for stocks that had moved on to greener pastures. In addition, we went back a little further and checked the development of other stocks that had made the jump a few years earlier.
There were 3,280 securities quoted by the OTCBB in the timeframe that we examined. A total of 62 of these stocks graduated to larger exchanges, consequently producing a 2% graduation rate. To put it in other words, the chance that your stock will not move to a larger market over the next year is a 98% possibility. That is a sobering thought, isn't it? Now, if you were going to make a venture on whether or not your stock will make the jump to a larger exchange, where would you put your money? It's a no brainer! Naturally, you would take the 98% bet. Despite the staggering odds, many investors bet their hopes and dreams on the 2% bet.
The thought sounds reasonable enough... your penny stock moves to a larger exchange and it ought to bring you huge returns, shouldn’t it? Here is a question for you, have you ever owned a stock that moved from the pinks or the OTCBB to a larger exchange? We have only had a few penny stocks that actually made it to a larger exchange of all of the ones that we have ever owned. Although it happened quite a long time ago, we keep in mind the first time that we had a stock graduate. When the stock finally made the long anticipated announcement that it was moving to a larger exchange, we remember jumping for joy. Our stock was headed for the AMEX. Personally, we were hoping for a move to the NASDAQ, but we were happy nonetheless. All right, we were moving towards the AMEX...finally, an "authentic" market for the stock. We were sure that it would take off. We figured that a move to the AMEX would give legitimacy to the stock, draw the attention of analysts, and make it accessible for common fund investment. Yes, we were ready for the money to roll in! Guess what happened when our stock made the move to the AMEX. Nothing. Absolutely nothing at all. That stock didn't do anything at all! We could not believe it.
Our enthusiasm was crushed when this happened. We had always looked for the one and only stock that would graduate from the OTCBB and make us wealthy. In conclusion we found a stock that seemed to have it all. It had a reasonable float (for a penny stock) it was ever-increasing its sales, and was turning an income. Best yet, it was moving to a big exchange. Why didn't it move when it hit the AMEX? We ran this scenario over and over in our heads. We just couldn't figure out what had happened. One day we finally thought to ourselves, "Who said that stocks would do great once they hit a large exchange?" The more we thought about it, the more we realized that we didn’t know anything about what a stock would do when graduating from the OTCBB. In our minds, we had assumed that the stock would do well. This sounds really clich?, but you know what happens when you assume.