OTC Markets Newsletter - March 2013

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OTC Markets Newsletter March 2013

“Slow PO” Your Way to the Public Markets:
A Letter from OTCM CEO, R. Cromwell Coulson

Everyone has been talking about the death of the small-cap IPO. According to one study, the sub-$50 million IPO has declined as a percentage of total IPOs from 80% in the mid-1990s to only 20% today.  Moreover, the total number of IPOs has declined sharply in the past ten years.

The Jumpstart Our Business Startups Act (JOBS) Act, signed into law on April 5, 2012, was created to allay some of these concerns by making it easier for small companies to raise capital and go public. Yet, still there is a national preoccupation with IPOs as a measure of the health of the small company capital market.

A traditional IPO is not the only way for a company to enter the public markets and reap the benefits of public trading, including corporate visibility, share liquidity, a public valuation, better access to capital and an ability to convey its reputation to investors, employees, customers, suppliers and the public. I refer to these methods collectively as the “Slow PO.”

Click to read more.

Instead of undergoing the traditional, accelerated IPO process, a seasoned company with an established investor base can slowly start to provide liquidity to its shareholders by making previously restricted shares available for trading in the OTCQX®, OTCQB® or OTC Pink® marketplaces under Securities Act Rule 144, filing a Form 10 with the U.S. Securities and Exchange Commission (SEC) or through certain confirmed bankruptcy plans. Capital raised through private placements to angel investors, private equity firms, and venture capital has created a huge pool of value that can be unlocked and used by companies to build an informed and efficient public market.

Slow POs are common practice for companies coming out of bankruptcy where they will issue new common stock to creditors as part of their reorganization plan. Because there are no “restrictions” on shares issued as part of a confirmed bankruptcy plan, they can be immediately traded on our marketplaces. There is a brisk market in the shares of companies post-bankruptcy as investors feel they are getting the stock at early bird prices from creditors who are happy to see some liquidity.

NASDAQ, predecessor to today’s NASDAQ OMX Group, is another example of a successful Slow PO. In 2000, the exchange did a private placement offering to NASD members. When the Rule 144 holding period expired, broker-dealers began trading those shares OTC. Three years later, NASDAQ did a secondary share offering at $9 a share and up-listed its shares on its own market.

At OTC Markets Group, we did our own Slow PO in September 2009 when our previously restricted stock became available for trading under Rule 144. A broker-dealer then filed a Form 211 with FINRA to begin trading our shares on the OTC Pink marketplace. A few months later, we qualified to upgrade to the OTCQX marketplace where our shares now trade under the ticker “OTCM.”

There are numerous benefits to a Slow PO for small companies. By gradually entering the public markets, a company can grow its liquidity organically and avoid the high costs and time pressures of a traditional IPO. The longer on-ramp to the public markets allows a company to choose the market visibility and reporting status that best fits its needs – SEC-reporting or the Alternative Reporting Standard – and enables investors to gain greater confidence in the quality of the company’s management and financials as the market in its shares expands. The gentler entry of a Slow PO also provides management with more resources to focus on growing the business rather than meeting the high expectations and externally-imposed financial targets of a traditional IPO.

Today, with the changes to our marketplaces, we are making it easier for successful, small companies to enter the public markets in a way that best suits their needs as they build their businesses and create more sustainable and trusted enterprises.

Click to close.

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Get to Know Your Community:
Stanislas Beneteau, Global Head of Sales, Global Equity Services, Deutsche Bank

Deutsche Bank, a leading global provider of financial solutions and Euromoney Magazine’s Best Global Investment Bank, is a depositary bank and Principal American Liaison (PAL) advisor for 21 OTCQX companies. Read what Stanislas Beneteau, head of Deutsche Bank's American Depositary Receipt (ADR) program, has to say about the benefits of an ADR program for international companies, Deutsche Bank's ADR services, and the key factors companies should consider before establishing an ADR.

Question: What are the key factors that international companies should consider when launching an ADR program?

Answer: There are two main things to consider.

Firstly, it’s important that things run smoothly day-to-day. So, be sure to find a depositary bank that has a highly proactive team doing the core servicing absolutely seamlessly. Our clients tell us that that’s crucial and I think our ability to do so is one of the reasons that we have unrivalled client retention rates.

Secondly, look for a banking partner that can provide the right kind of value-add services on top of the core. You don’t want your bank constantly trying to sell you additional services, but you do want them to be able to provide those that matter to you, those that are relevant to your circumstances. At Deutsche Bank, we pride ourselves on delivering bespoke solutions. Some of our clients, for example, rely on our specialist local ADR legal teams to keep them ahead of the latest regulatory requirements likely to impact them; others want to promote themselves and so make more use of our investor relations advisory services. It’s all about identifying what matters to you and finding a banking partner that can provide it.

Click here to read the full interview.

Newsletter Sponsor

Continental Stock Transfer & Trust

Monthly Trade Summary — February 2013

OTC Marketplace # Securities* Monthly Dollar Volume Monthly Dollar Volume
per Security
Aggregate Market Capitalization
(in Millions)*
OTCQX® 381 $2,207,579,979 $5,794,173 $1,209,716
OTCQB® 3,386 $4,055,813,949 $1,197,819 $189,269
OTC Pink® Current Information 2,614 $6,071,214,062 $2,322,576 $10,868,292
OTC Pink Limited Information 498 $105,178,875 $211,203 $6,244
OTC Pink No Information 3,094 $552,141,242 $178,455 $34,782
Totals 9,973 $12,991,928,108 $1,302,710 $12,308,303
* Selected data as of February 28, 2013.

Events & Sponsorships

OTC Markets Group has attended or will attend the following events to educate investors, broker-dealers, and OTCQX, OTCQB and OTC Pink companies about our marketplaces.

Marcum MicroCap Conference (May 30, 2013)

NY Tech Day (Apr. 25, 2013)

STANY’s 77th Annual Conference and Dinner (Apr. 25, 2013)

ACA Summit (Apr. 17-19, 2013)

The Investment Traders Association (Apr. 11-12, 2013)

LDJ Capital’s The Soho Loft Innovative Investing Symposium in partnership with Thomson Reuters PartnerConnect (Apr. 5, 2013)

25th Annual ROTH Conference (Mar. 17-20, 2013)

Princeton University Career Fair (Feb. 22, 2013)

IPAA-OGIS Florida Conference (Feb. 13, 2013)

35TH Annual Conference on Securities Regulation and Business Law (Feb. 7-8, 2013)

IR Magazine Awards — Canada (Feb. 6, 2013)

 

Contact us if you are interested in meeting us at one of these events.

News & Updates

Edison Investment Research’s Report on OTCM - Edison Investment Research (Mar. 27, 2013)

OTC Markets works on market tech - Wall Street Letter (Mar. 18, 2013) (subscription or registration for free trial required)

A Rebel Speaks Against the Hub-and-Spoke World - AllAboutAlpha.com (Mar. 17, 2013)

OTC Markets Group Grows, Despite Fewer Market Makers - Traders Magazine Online (Mar. 14, 2013)

JOBS Act Opens Path to Deregistration - CFO.com (Mar. 12, 2013)

OTC Markets Gains Companies, Loses Volume - Securities Technology Monitor (Mar. 7, 2013)

Small Banks Continue to Weigh Pros, Cons of Deregistering - American Banker Online (Feb. 27, 2013) (subscription or registration for free trial required)

OTC Market's Coulson Says Fragmentation is Good - Traders Magazine Online (Jan. 31, 2013)

Product Updates

OTCIQ BASIC

OTC Markets Group recently introduced OTCIQ Basic as a free Investor Relations service to help companies that are at the very early stages of their investor engagement to better serve their investors. OTCIQ Basic is an entry point for OTCQB and OTC Pink companies to start providing information to their investors. Click here to learn more about what's included.

THE OTC SERVICE PROVIDER DIRECTORY

Coming soon, the OTC Service Provider Directory offers a host of companies with expert 3rd party services that can benefit the 10,000 companies that trade on our marketplaces. A basic listing in the OTC Service Provider Directory is free of charge. Advertising in the Directory is available — to learn more about pricing, contact Allison Funkhouser at 212-896-4470 or Allison@otcmarkets.com.

Market Data Updates

tradeMONSTER, an online trading platform for active stock and option traders, is now offering its users access to OTCM's Real-Time Level 1 data.

Markit Group Limited now offers derived OTCM market data to its institutional clients across its suite of transaction analysis services.

Wolverine Execution Services (WEX) is now a distributor of OTCM's Real-Time Level 1 data.

• After the merger of TradeKing and Zecco, OTC Markets Group's Real-Time Level 1 prices are available to TradeKing customers.

OTC Markets Regulation & Compliance

Updates from FINRA

FINRA will be creating a new platform for the OTC Reporting Facility (ORF) that is expected to replace the current OTC Reporting Facility in August 2013. The new ORF will incorporate new message formats for trade reporting. More information can be found by clicking here.

FINRA is proposing to amend the FINRA trade reporting rules to require member firms to report OTC transactions in National Market System (NMS) and OTC equity securities to FINRA as soon as practicable, but no later than 10 seconds following an execution. The SEC is requesting comments on the proposed rule change. More information can be found by clicking here.

OTCQX - New Additions

4 new companies joined OTCQX in February:

A complete list of OTCQX companies is available on www.otcqx.com.

Our Marketplaces

OTCQX
The Best Marketplace With Qualified Companies

OTCQB
The Venture Stage Marketplace with U.S. Reporting Companies

OTC Pink
The Open Marketplace with Variable Reporting Companies

For questions, please contact OTC Markets Group.
www.otcmarkets.com • 212-896-4420 • info@otcmarkets.com

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© 2013 OTC Markets Group Inc.