Investors can now peer through financial data for hundreds of companies trading on the over-the-counter market with the use of OTC Fundamental Data Service, a platform developed by Rockville-based Edgar Online.
Companies selling securities on the over-the-counter market, where broker-dealers place orders directly with peers rather than through a central exchange, are not required to issue public disclosures. Experts often warn this practice, a departure from the way the New York Stock Exchange and Nasdaq Stock Market operate, raises the risks for investors, who often have less information to work with.
While OTC Markets Group organizes its stocks into three categories — OTCQX, OTCQB and OTC Pink — based on the level of financial disclosure and performance, the New York-based marketplace wants greater transparency, according to its managing director for market data and strategy, Matt Fuchs. OTC Markets Group turned to Edgar Online, known for building the Securities and Exchange Commission’s database of financial reports.
They have a ton of experience in the space,” Fuchs said. “We have our own disclosure news service similar to the [SEC’s] old Edgar [financial reporting] system. But getting the data out in a more consumable fashion would help investors, so this was a natural progression.”
OTC Fundamental Data Service provides three years of information, such as cash flow and income statements, voluntarily provided by more than 800 companies, including sporting apparel retailer Adidas. Investors, analysts and researchers can access the data through the OTC Markets Web site, Yahoo Finance or I-Metrix Pro, an Edgar Online database.
“The biggest market we’re going to see for this will come from institutional investors who can now incorporate this information into their financial models to determine which OTC companies they should be investing in,” said David Frankel, chief marketing officer at Edgar Online.
Companies listed on the over-the-counter market range from micro-cap start-ups to large cap multinational operations. The market is known as a refuge for companies de-listed by the more prestigious exchanges as well as a home for those that are too small for Nasdaq or NYSE. The over-the-counter market is filled with firms with a market capitalization below $100 million.
Frankel expects the current group of companies included in the data service will expand in the coming months as more firms recognize the value of the transparency. Reporting, he said, lends credibility to their business and will make the OTC market more attractive.