Adrs

American Depositary Receipts (ADRs) ## What is an ADR? An American Depositary Receipt (ADR) is a certificate issued by a U.S. bank that represents ownership in shares of a foreign company. Instead of buying shares directly on a foreign exchange (in another currency, under foreign regulations), Americans can buy ADRs on U.S. exchanges in U.S. dollars. The big picture: ADRs make it easy for U.S. investors to own foreign stocks. They're one of the most practical tools for international diversification. --- ## How ADRs Work 1. A foreign company (say, Toyota in Japan) wants U.S. investor money 2. A U.S. depositary bank (like JPMorgan, Citibank, or Bank of New York Mellon) buys shares of Toyota in Japan 3. The bank holds those shares in a custodian bank in Japan 4. The U.S. bank issues ADRs representing those shares and sells them on U.S. exchanges 5. U.S. investors buy ADRs through their normal brokerage account in dollars ### Conversion Ratio One ADR doesn't always equal one foreign share. The bank can structure ADRs to trade at a price range comfortable for U.S. investors: - 1 ADR = 1 foreign share (common) - 1 ADR = 5 foreign shares (if foreign shares are very cheap) - 1 ADR = 1/10 of a foreign share (if foreign shares are very expensive) > Example: Samsung shares trade at ~₩70,000 per share (Korean won, roughly $50). A U.S. bank might structure an ADR where 1 ADR = 0.5 Samsung share, trading at ~$25 on NYSE. This makes Samsung accessible to U.S. investors who want to buy round lots. --- ## Sponsored vs. Unsponsored ADRs Sponsored ADR The foreign company actively participates in and supports…