How an ADR Works and the Value for Companies & Investors
What is an ADR?
American Depositary Receipts (ADRs), ownership interests in international securities that are issued by a U.S. depositary bank, enable U.S. investors, ranging from high net worth individuals to institutions, to globally diversify their portfolios in a seamless manner. Traded in U.S. dollars, during U.S. trading hours, through a U.S. broker-dealer, ADRs reduce complexity for investors, who can rely on the depositary bank to manage all custody, currency and local taxes issues.
How an ADR Works
The Value of an ADR
Visibility and Information Distribution
- Creates greater visibility for the company with information easily accessible in the U.S. to financial data providers and media outlets
- Establishes clear information channels, providing U.S. investors easy access to company disclosure, which is made available in English
- Drives volume and liquidity in home market trading and creates efficient U.S. prices through cross-border broker connectivity and ADR convertibility
- Makes investing in global companies through U.S. broker-dealers and investment advisors easy for a large and diverse pool of investors, including institutional, managed, wrap and self-directed U.S. dollar accounts
- Increases access to investors for companies with a primary listing in smaller markets where investment firms and brokerages may not have representation
- Allows U.S. employees, customers and stakeholders to easily follow and invest in global companies
- Lowers complexity for investors through reputable counterparties -- depositary bank and local custodians with strong credit ratings and competitive fees handle foreign ordinary shares custody, currency and tax issues
- Dividends paid and taxed in U.S. dollars with low cost U.S. clearing and settlement through DTC
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