In 2018, over 75 percent of securities that upgraded to OTCQX, the highest tier of OTC Markets, were in the cannabis, basic materials, and financial sectors. (According to an analysis of issuer data.)
There are over 10,000 securities that trade on one of OTC Markets three tiers—OTCQX Best Market, OTCQB Venture Market, and the Pink Market—depending on their financial health and level of compliance. Every month, securities may be downgraded to different tiers based on their compliance with the specific market’s requirements. Additionally, many companies choose to graduate to a higher tier to provide greater transparency to investors. A move to the top tier, OTCQX, is considered an upgrade as it signifies a company’s ability to comply with stronger qualifications, including higher financial standards, the ability to follow best practice corporate governance, demonstrate compliance with U.S. securities laws and be current in their disclosure.
Through November, the latest month data is available, 107 companies have chosen to graduate to OTCQX in 2018. Of those, 29 were companies in the burgeoning cannabis sector, 27 were basic materials/mining companies, and 27 operate in the financial industry.
The prevalence of cannabis stocks upgrading corresponds with the federal legalization of recreational cannabis in Canada and ongoing legalizations in the United States leading to overall growth across the sector. These new companies trading on OTCQX include some well-known names such as Green Organic Dutchman Holdings Ltd. (OTCQX: TGODF), General Cannabis Corp. (OTCQX: CANN), Green Thumb Industries Inc. (OTCQX: GTBIF), and Organigram Holdings, Inc. (OTCQX: OGRMF).
The same can be said about the financial sector, as rising interest rates have likely contributed to higher profit margins and stronger financial performance for community banks. Most financial securities to upgrade to OTCQX were regional and community banks such as SVB&T Corporation (OTCQX: SVBT) and Delmarva Bancshares, Inc. (OTCQX: DLMV).
Somewhat surprising are the high number of mining stocks, considering most precious metals are down for the year. Still, companies like Riviera Resources, Inc. (OTCQX: RVRA), K92 Mining Inc (OTCQX: KNTNF), and Largo Resources Ltd. (OTCQX: LGORF) chose to upgrade to OTCQX.
Only three companies operating in the cryptocurrency/blockchain space have moved up to OTCQX this year: Ethereum Classic Investment Trust (OTCQX: ETCG), Blockchain Mining Ltd. (OTCQX: BLLCF), and Victory Square Technologies Inc (OTCQX: VSQTF).
The remaining upgrades consisted of companies in the tech, energy, healthcare, consumer discretionary, and consumer staples sectors.
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