What is an American Depositary Receipt (ADR), and how does it work?

[Lilly]

Have you heard of American Depositary Receipts and wondered how they allow investors to buy shares of foreign companies in the U.S. market? Many people ask what ADRs are, how they are traded, and what benefits or risks they offer compared to investing directly in overseas stocks.

 

[OlivaRock]

Consider an ADR a short cut- it is a U.S.-traded investment that is similar to shares of a foreign company, therefore you do not have to deal with foreign markets. You purchase and dispose of it in dollars as a standard U.S. stock and that makes the life much easier (that said, there are a couple of currency risks and foreign-market risks to consider).

 

[Muichiro]

An American Depositary Receipt (ADR) is a way for U.S. investors to buy shares of a foreign company. A U.S. bank holds the foreign shares and issues ADRs that trade on U.S. exchanges, making it easier to invest internationally.

 

[Zoe]

ADR is a document of deposit, which is issued by an American Bank in the stock of a foreign corporation. It is traded in U.S. stock exchanges just like domestic stocks; this means that investors purchase international equity in dollar form without having to worry about the conversion of money to foreign currencies.

 

[Darcey]

An American Depositary Receipt (ADR) is a financial instrument that allows U.S. investors to invest in foreign companies. ADRs represent shares of a foreign stock held by a U.S. bank. They trade on U.S. exchanges in dollars, simplifying international investing and reducing currency and settlement complexities.