The OTC’s Back in Town

finance | BCBusiness
Cromwell Coulson (left foreground) at the Four Seasons Vancouver

CEO visits Vancouver touting a revamped U.S. over-the-counter trading platform that offers B.C. companies access to U.S. investors

Cromwell Coulson, president and CEO of the OTC Markets Group, was in town this week drumming up business for a new and improved U.S. over-the-counter trading system.
Coulson told an audience of about 30 finance professionals gathered at the Four Seasons Hotel Thursday how the OTC has moved beyond penny stocks to build a trusted platform for venture stocks, and why there’s never been a better time for Canadian juniors to trade on OTC platforms.
Coulson explained that OTC Markets Group transformed the “pink sheets” market in the U.S. to an electronic trading platform, and segregated three tiers of companies, the most valuable of which now trade on a premium market, branded OTCQX. A mid-tier group of companies trades on the  OTCQB, and a variety of securities, including distressed and delinquent companies trade on the OTC Pink market .
The OTCQX premium trading platform currently lists 339 companies, 175 of which are Canadian. Chief among the requirements of trading on the OTCQX is a minimum bid price of ten cents, setting the bar just above penny-stock range. Other requirements include a market capitalization of at least $5 million, and annual revenue of at least $2 million.
Coulson said the OTCQX fills a void left by the NASDAQ exchange, which has forsaken venture financing to chase bigger fish, having become the favoured exchange of such giants as Apple, Google, Microsoft and Facebook.
“When NASDAQ decided they want to be Pepsi to the New York Stock Exchange’s Coke, we saw an opportunity,” he said.
Vancouver is the only Canadian stop on Coulson’s tour. “There are about 800 public companies within ten blocks,” he explained to BCBusiness. “Vancouver’s got a great resources base, is a great smaller and venture-stage market.”
Coulson outlined reasons why the timing is right for B.C. companies to gain access to U.S. investors through the OTCQX platform, chief among them recent regulatory changes aimed at facilitating venture financings. Two pending regulations introduced by the Jumpstart Our Business Startups Act make U.S. markets particularly appealing to Canadian juniors: one exempts financings up to $50 million from the more onerous of SEC filing requirements; the other removes restrictions that prohibited advertising to or soliciting accredited U.S. investors.
The latter is particularly attractive to Canadian companies looking to raise money, since a number of online platforms have emerged that link venture companies with accredited U.S. investors, explained Michael Taylor, a partner at Vancouver law firm McMillan LLP who attended the Thursday event. “It gives a greater opportunity to reach an expanded network of accredited investors,” he said.
Taylor, who is also co-chair of the U.S. Securities practice group at McMillan, gave a vote of confidence to the OTCQX, both for its technological advances and its increased transparency. “They’ve increased the access for people trading through online [U.S.] brokerages like Scottrade and ETrade, so those stocks are now more accessible to [U.S.] investors,” he told BCBusiness. “And they’ve made things more transparent in terms of the information that’s available to investors.”