Headlining OTC Stock: Investors Focusing On MTN GROUP LTD ORD (MTNOF)

After a recent trading session, shares of MTN GROUP LTD ORD (MTNOF) have begun to draw interest from OTC investors as the price adjusted -0.12, hitting the  $8.26 price point.

Taking a looking back, MTN GROUP LTD ORD (MTNOF)’s stock was $-0.52 over the last 12 months with the 52-Week high of $10.41 and 52-Week low of $6.64.

Calculating a company’s market value, aka. market capitalization (market cap) allows financial analysts and investors to evaluate the size of a corporation relative to the marketplace.  Market cap can be interpreted as an expression of the public’s confidence in a company because the calculation reflects the public’s investing patterns.  Financial institutions can group similarly-sized companies into groups such as large-cap, mid-cap and small-cap by establishing a corporation’s market capitalization.

Market capitalization is an important financial indicator for two basic reasons.  Firstly, the calculation aids investors in establishing comparison in value between corporations who have different prices of their stocks.  Secondly, market cap helps determine a company’s size in relation to its competitors.  A company’s market cap changes as its stock price changes, so inancial publishers calculate market capitalization for public companies daily.  MTN GROUP LTD ORD (MTNOF)’s market cap is currently $15780000000.

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MTN GROUP LTD ORD’s stock has performed at $0.73 month over month. Their short interest currently stands at 6812200 with 4865.9 days to cover, compared to 6762800 short interest last month.

The over-the-counter (OTC) market is a place where thousands of stocks not listed on the NYSE, AMEX, or Nasdaq are traded.  This term is used to describe exclusively for small or marginal companies that don’t meet the listing requirements of the regulated markets.  These stocks are also sometimes referred to as “pink sheet” stocks, a term left over from the old days when over-the-counter stocks lists were printed on pink paper (now almost exclusively online).

Since these stocks are so small and often financially suspect, OTC stocks are considered to be risky and, thus, are infrequently traded.  Though the very fact that they are so infrequently traded means that the chances of finding a bargain price is increased over those stocks that are traded on an organized market, causing some traders to buy OTC stocks in the hopes of cashing in on fast gains.  The possibility of quick gains is made easier due to the fact that the prices of most OTC shares are low, often under $2.00-$1.00, though it’s made more difficult by the fact that information on these stocks is scarce and often unreliable.  Trading in OTC stocks is similar to straight gambling, and it is not recommended for beginners.

In a decentralized market, one without a central physical location, market participants trade with one another through a myriad of communication methods such as email, proprietary electronic trading systems, and the telephone.  The over-the-counter (OTC) market and the exchange market are two of the basic ways to organize a financial market.  Within an OTC market, dealers are the market makers when they quote the prices where they will buy and sell a security or currency.  Trades can be executed between two players in an OTC market without anyone else being made aware of the price at which the transaction took place, making OTC markets less transparent than exchanges.  They are also subject to fewer regulations, muddying the waters even further.

OTC markets are used primarily to trade currencies, bonds, structured products and derivatives.  OTC markets can also be used to trade equities, such as the OTCQB, OTCQX, and OTC Pink marketplaces in the United States.  Dealers that operate in the U.S. markets are regulated by the Financial Industry Regulatory Authority (FINRA).

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OTC markets are a place where dealers and clients trade with each other as if they were corporations and institutions and is a place where dealers trade with each other.  The price a seller quotes to a buyer may differ from the price it quotes to another buyer, and the ask-bid margin may also be wider. 

OTC markets function well during the normal times, but their lack of transparency can cause a vicious circle to develop during financial stress, and was the case during the 2007-2008 global credit crisis.  Mortgage-backed securities such as CDOs and CMOs, which were traded exclusively in the OTC markets, could not be reliably priced as liquidity dried up with the dearth of buyers.  What resulted was an increased number of dealers pulling out from their market-making functions, increasing the liquidity problem while causing a worldwide credit crunch.  The regulatory initiatives created in the aftermath of the crisis resolved this issue with the use of clearinghouses for post-trade processing. 

Disclaimer: The advice provided on this website is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs.  Where quoted, past performance is not indicative of future performance.

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