Anonymous
Anonymous asked in Business & FinanceInvesting · 1 decade ago

Exactly what are ADR's (American Depository Receipt)?

I dont' get it. My book gives the following definition: "claims issued by US banks representing ownership of shares of a foreign company's stock held on deposit by the US bandk in the foreign market and issued in dollars to US investors"......URRRGHHH????????

Could somebody dumb it down for me please lol.

thanks!

Update:

does that mean that the shares are held in the foreing country or in the US? I don't get it.

Update 2:

I'm startin to get it. But what about the movement of the stock? does it move along with the issues in the foreign market?

5 Answers

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  • Anonymous
    1 decade ago
    Favorite Answer

    They are essentially shares of a foreign corporation that are held in your US brokerage account denominated in USD. They are not necessarily a 1:1 ratio. One ADR could be any number of shares of the company. I had some shares of Cemex (symbol CX)

  • Ted
    Lv 7
    1 decade ago

    The simplest thing to do is just think of it as stock and forget it's an ADR.

    More complicated: the bank takes a little fee and handles all the registration paperwork in the US and handles the currency translation so that the owners don't get dividend checks in Yen or Euros or whatever and don't have find a broker to buy and sell on the stock market in Osaka or Frankfurt.

    There is no reason that you can't still instruct your broker to buy you shares of Toyota directly on a stock market in Japan, but why would you want to?

  • farlow
    Lv 4
    3 years ago

    The ADR will signify the actual presence of shares from the issuing company deposited at a repository, like the economic business enterprise of vast apple, a million ADR represents a million or greater shares that are denominated interior the forex of the country of difficulty and the dividends is often paid interior the forex of the country of difficulty and converted into money. you may look at the small print of the ADR to be sure what the ADR to the underlying share ratio is,

  • Anonymous
    1 decade ago

    You can't buy stock on the Tokyo Exchange for Toyota.

    However, you can buy an ADR from a bank here (who holds that stock on the Tokyo exchange) - so you own it here, the bank owns it here and in Tokyo.

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