American Depositary Receipt

An American Depositary Receipt (ADR) is the most common type of GDR. It is a security issued in the USA that bundles together a number of shares in a non-US company. ADRs are also called American depositary shares.

The actual shares are held by a US bank as a trustee. The benefits of the shares belong to the holders of the ADRs. For example, the dividends are passed on to the holders of the ADRs. Each ADR gives beneficial ownership of a number of shares.

ADRs are frequently used by non-US companies that want a secondary listing in the US. This is becoming somewhat less popular as the cost of listing in the US has increased with more stringent regulatory requirements.

A secondary listing of ADRs in the US may still be worth the expense for very large companies that really do need access to the enlarged pool of investors.

Copyright Graeme Pietersz © 2005-2020