Can you use stock in a holdco that trades on OTC?

Can OTC stock be used to buy a company?

Yes. Nothing in the securities rules requires an exchange listing to issue shares in an acquisition. The question is whether a seller will accept the shares at a fair value. Shares on an over-the-counter market are harder to sell, so sellers usually discount them or ask for protection.

What do the OTC tiers require?

The market has tiers with different entry standards. These are the published figures as of October 2026.

• OTCQB Venture Market (OTCQB Rules, version 6.1 dated September 17, 2026): a bid of at least $0.05 at the close of each of the 30 consecutive calendar days before admission, and $0.01 on at least one day in every 30 to stay. At least 10 percent of the class in public float. At least 50 beneficial shareholders each holding 100 shares or more. The company must be current under one of the listed reporting standards, including SEC reporting.
• OTCQX U.S. (OTCQX U.S. eligibility requirements, updated April 2026): a bid of $0.25 to qualify and $0.10 to stay. Market capitalization of $25 million to qualify and $10 million to stay, plus a public float worth at least $5 million. At least 100 beneficial shareholders. Annual financials audited by a PCAOB-registered auditor. The company must meet a penny-stock exemption, such as net tangible assets of $2 million (three years of operations) or $5 million (less), or average revenue of $6 million.

The OTCQB bid price was raised from $0.01 to $0.05 for admission in a rule change published for comment on March 5, 2026 and scheduled to take effect April 6, 2026 (OTCQB Rules Release No. 12). The September 17, 2026 rules include the $0.05 test. Check the current rules before you rely on a figure.

What rules follow the shares around?

• Penny stock. A share priced under $5.00 is generally a penny stock unless an exclusion applies, such as net tangible assets above $2 million after three years of operations, or average revenue of $6 million over three years (17 CFR 240.3a51-1 (Cornell LII copy)). Penny-stock rules add steps for brokers that can reduce who will trade the stock.
• Quoting information. A broker-dealer can publish a quote only if specified issuer information is current and public. An issuer current in its SEC reports can use those filings (17 CFR 240.15c2-11 (Cornell LII copy)).
• Shell status. A company that is or was a shell faces extra limits on resale under Rule 144(i) (17 CFR 230.144 (Cornell LII copy)).
• No exchange approval rule. Nasdaq's 20 percent shareholder-approval rule does not apply to a company that is not Nasdaq-listed. Your charter, state law and the deal terms still limit how many shares you can issue.

What does illiquidity look like in numbers?

Assumptions. An OTCQB holdco has 30,000,000 shares at $0.60, a market value of 30,000,000 x 0.60 = $18,000,000. Daily volume is 20,000 shares, or 20,000 x 0.60 = $12,000 a day. It buys a business for $3,000,000 in shares.

• Shares issued: 3,000,000 / 0.60 = 5,000,000.
• The seller's ownership: 5,000,000 / 35,000,000 = 14.3 percent.
• Selling all at full daily volume would take 5,000,000 / 20,000 = 250 trading days.
• Selling at 10 percent of volume, which is 2,000 shares a day, takes 5,000,000 / 2,000 = 2,500 trading days, about 9.9 years at 252 trading days a year.

A seller who sees this will ask for cash, registration rights, a price floor or a large discount. The share price also moves when the seller sells.

How can an OTC holdco make its stock more acceptable?

• Pay part in cash or a note so the seller does not depend on the market. See how you pay a seller with stock.
• Offer registration for resale, as described in this article on registering seller shares.
• Report to the SEC and keep filings current, which helps with the information tests above and with Rule 144.
• Describe a path to a listing. See how a holding company moves from OTC to Nasdaq. Do not promise one. Your seller needs to know it may not happen.
• Build the trading base. More shareholders and more volume make shares easier to value.

My view is that OTC stock works best as a minor part of the price, with a plan to improve liquidity, not as the main currency.

Where these numbers come from: OTCQB figures are from OTCQB Rules, version 6.1 dated September 17, 2026 and OTCQB Rules Release No. 12. OTCQX figures are from OTCQX U.S. eligibility requirements, updated April 2026. Penny-stock definitions are from 17 CFR 240.3a51-1 (Cornell LII copy), quoting information from 17 CFR 240.15c2-11 (Cornell LII copy) and shell limits from 17 CFR 230.144 (Cornell LII copy). The share count, price, volume and deal size in the example are assumptions. OTC Markets can change its standards, and fees are set in its fee schedule. Confirm with a securities lawyer.

Related questions

Does an OTC holdco need to be an SEC reporting company?

Not for every OTC tier, since alternative reporting exists on OTCQB. SEC reporting makes Rule 144 and quoting information easier to meet and helps sellers trust the numbers.

Is OTC stock worth less to a seller than Nasdaq stock?

Usually it is harder to sell, so sellers ask for more. There is no standard discount, so negotiate the price and terms.

Can I move from OTC to Nasdaq later?

Yes, if you meet Nasdaq's listing standards. See Nasdaq listing requirements in 2026.

What comes next

If the plan is to move to an exchange, read how a holding company uplists from OTC to Nasdaq.

Related articles

• OTCQB to Nasdaq: what does a holdco need to uplist?
• What are Nasdaq's 2026 listing requirements for a small company?
• How do lockups and Rule 144 affect sellers who take holdco stock?
• What are the ways a holding company can go public?
• What does it cost to take a holding company public and keep it public?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.