This is a question that is often asked by investment analysts and by some individual institutional investors. As will be argued in this paper, there are several implied questions within that question, each of which must be answered before the answer to the primary question can be offered. Those implied questions, which will also serve as the organizational structure for this discourse, are:
2. How can a stock be listed on NASDAQ?
3. How are stocks typically valued?
4. Can these methods be applied to NASDAQ stocks?
NASDAQ is an acronym form the National Association of Securities Dealers Automated Quotations stock market. NASDAQ is the world's first electronic stock market and the second largest stock market in the world. It is also the fastest growing stock market in the United States, and is a completely automated, OTC (Over The Counter (OTC) market.
This automation means that NASDAQ relies on telecommunications and computer technology in its' operations.
NASDAQ traces its history to 1961, when the U.S. Securities and Exchange Commission (SEC) conducted a special study of all securities markets. One of the findings, announced in 1963, was that the (OTC) securities market as fragmented and obscure. The SEC proposed that these markets could be automated, and instructed The National Association of Securities Dealers, Inc. (NASD) to comply.
In 1968, the first computer architecture for the automated system began, and it took some three years to complete. On February 8, 1971, the system premiered, displaying median quotes for more than 2500 over-the-counter securities.
Requirements for listing a stock with NASDAQ were tightened in 1975, at which time NASDAQ required more stringent listing requirements. According to the very informative NASDAQ web site, the stock information is maintained in two locations -- a Central Computer Complex in Trumbull, Connecticut and at the National Association of Securiti...