The OTCBB is a market for smaller companies that do not meet the market capitalization, minimum stock price, or other requirements needed to be listed on the larger exchanges. Because of the low share prices, the stocks are often referred to as OTCBB penny stocks. The only requirement of the OTCBB listing requirements are that a company has to have audited financials following the requirements set forth by the SEC. However, OTCBB pink sheets are listings that do not have the proper SEC filings. Because they are not filing to the SEC, pink sheets are often more risky than the other stocks listed on the Over the Counter Bulletin Board.
For example, Wawadoo Inc. is a startup company that manufactures widgets for the market. Although it is a small company right now, management believes that the company has great growth potential. Management believes they can list it on the NASDAQ eventually; however, it does not meet the requirements for now. As a result, Wawadoo has decided to go ahead and list itself on the OTCBB to establish the company in the market. As it grows, they will move into the larger exchanges.