Help understanding investing in an ADR or foreign stock?
I notice that ADRs are American addresses for international stock. I could buy TESCO for example, which is a few hundred bucks, or the ADR which is around twenty. When I am buying the ADR, what am I buying exactly? It still has dividends, but is much cheaper. I don't understand the difference or why it would not be priced in a US dollar equivalent of the foreign stock.
- Anonymous10 years agoBest Answer
An ADR is an American Depository Receipt. This means the depository buys the actual shares and then issues their own paper representing those shares. You will find that the ADR usually represents greater than one share. I.e. Tesco is 1 ADR= 3 shares
The depository for Tesco is Deutsche Bank Trust Company Americas. The ADR is about $20.10
Three Tesco shares would be about £13 (x 1.5203 = $19.76)
The object is to enable US residents to buy (for example ) UK shares.Source(s): http://www.shareworld.co.uk