OTC Stock Generating Interest: LARSEN & TOUBRO LTD (LTOUF)

LARSEN & TOUBRO LTD (LTOUF)’s shares have been getting a closer look from OTC investors because the stock’s price moved 0.84, touching the $20.09 price level upon recent trading.    

Let’s review the following historical numbers.  LARSEN & TOUBRO LTD (LTOUF)’s stock was $-0.16 over the last year with the 52-Week high of $23.78 and 52-Week low of $15.6.

Market Capitalization (Market Cap) is a calculation of business value based on number of outstanding shares and share price.  It represents the market’s general view of a company’s value and is one of the major determining factors in stock evaluation.  For example, if a corporation has 2 million shares outstanding at a share price of $25, its market cap is $50 million (2 million x $25).  Companies are categorized based on the size of their market capitalization.  There are five basic market cap groups:  mega-cap (market cap over $200 billion), large-cap ($10 billion – $200 billion), mid-cap ($2 billion – $10 billion), small-cap ($300 million – $2 billion), and micro-cap ($50 million – $300 million).  However, market cap does not account for debt and certain other factors, meaning that it is not always a comprehensive indication of a company’s value Currently, LARSEN & TOUBRO LTD (LTOUF)’s market cap is $17950000000. 

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LARSEN & TOUBRO LTD’s stock has performed at -0.05 month over month.  Short interest stands at 191700 with 958.5 days to cover, compared to 191800 short interest last month. 

An over-the-counter (OTC) security is one which is traded in somewhere outside the traditional, formal exchanges such as the Toronto Stock Exchange, the New York Stock (NYSE), or the NYSE MKT (formerly known as the American Stock Exchange).  The phrase “over-the-counter” is used to refer to stocks that trade through a dealer network as opposed to a trade on a centralized exchange.  OTC also refers to debt securities and other financial instruments which are traded through a dealer network.

Many investors find little practical difference between the OTC and the major exchanges, due to improvements in electronic quotation and trading which have facilitated higher liquidity and more quality information, though there are stark differences between the two transaction mediums.  On a traditional exchange market, all buyers and all sellers are exposed to offers by all other parties, which is not always the case with dealer networks.  Less transparency and less stringent regulation on these exchanges cause unsophisticated investors to take on additional risks. 

The OTC Markets Group operates the most well-known networks, networks such as the Pink Open Market, the OTCQB Venture Market and the OTCQX Best Market.  These markets are known for including unlisted stocks that trade on the Over the Counter Bulletin Board (OTCBB).  Though Nasdaq operates as a dealer network, their stocks are not classified as OTC due to the fact that they are considered to be a stock exchange.  Alternatively, OTCBB stocks are usually penny stocks or are stocks offered by companies with a poor credit history. 

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Stocks are traded over-the-counter because the company is very small and usually cannot meet the requirements of listing exchanges.  Also called “unlisted stock”, these commodities are traded by broker-dealers who negotiate directly with one another, with the dealers acting as market setters, and the OTC Bulletin Board acts as an inter-dealer quotation system, providing trading information. 

Because an underlying company does not wish to meet the stringent exchange requirements, American depository receipts (representing foreign shares), are often traded over-the-counter.  Also, bonds do not trade on a formal exchange market and are considered to be OTC securities. 

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