The above diagram merely suggests a possible progression for companies who seek quotation on OTC.

Most companies seek to list on the stock exchange to raise large amount of funds and obtain higher valuations. However, many of these companies are not able to meet the relatively more stringent listing criteria of stock exchanges, such as minimum company size, proven operating and profit track record, as well as a minimum shareholders’ spread.

On the other hand, if the company approaches private equity and venture capital firms to raise funds, these private equity and venture capital firms, if they do decide to invest in the company, may have covenants which make it onerous for the companies to comply with.

OTC Capital thus fills this gap by creating a bridge for companies to gain access to registered OTC investors via its market making platform. It also helps promoters of OTC companies garner their own investors as there is a need for some information on the companies to be made available in the Small Offers Document and some legal due diligence is done on the company when they are issuing shares via OTC Capital. Also, there are disclosure obligations that the OTC companies must meet.

OTC companies may or may not progress to list in the the stock exchange just as companies may or may not opt to quote on OTC to raise funds to help them in their growth endeavours.