Explained
ADR vs ordinary shares
Ordinary shares trade on a company's home exchange in local currency. An ADR is a US bank's receipt for some of those shares, traded in dollars.
| ADR | Ordinary shares | |
|---|---|---|
| What it is | A receipt for shares held by a US depositary bank | The share itself |
| Where it trades | NYSE, Nasdaq or over the counter | The home exchange, e.g. London, Paris, Tokyo |
| Currency | US dollars | Local currency |
| Ratio | One ADR can equal several shares, or a fraction of one | One share |
| Extra costs | Depositary fees, charged by the bank | None of that kind |
| Same company? | Yes | Yes |
What is the difference between an ADR and an ordinary share?
An ordinary share is ownership in the company, listed where the company is based. An American Depositary Receipt is a stand-in for it: a US bank holds the real shares in custody and issues receipts against them that trade in New York like any American stock. Dividends are converted into dollars and passed through, less the bank's fees.
ADRs come in levels. Level I trades over the counter with light reporting. Levels II and III list on a US exchange, and Level III is used when the company raises new money in the US.
Why do the two lines show different prices?
Because of the ratio and the currency. An ADR worth five shares should trade near five times the home price converted into dollars. Small gaps open when one market is closed and the other is not, and close again when both are trading.
What do foreign companies file in the US?
A listed ADR issuer usually files an annual report on Form 20-F with the SEC instead of the 10-K a US company files, and furnishes interim updates on Form 6-K.
One company, one set of numbers
Several consumer companies on this site trade on more than one line, a home listing plus a second listing or an ADR. Their brand numbers are added up once per company, whichever line you look it up by.
16 companies on this site have more than one line, out of 185.
- Toyota
- Honda
- Ambev
- Berkshire Hathaway
- Diageo
- Hindustan Unilever
- Lindt & Sprüngli
- The Magnum Ice Cream Company
- News Corp
- Piccadily Agro Industries
- Restaurant Brands International
- Ferrari
ADR vs Ordinary shares: common questions
- Is buying an ADR the same as owning the shares?
- Economically it is close: an ADR tracks the shares and passes through dividends. Legally you hold a receipt from the depositary bank, which holds the shares, and voting rights pass through only as the deposit agreement allows.
- What is a GDR?
- A global depositary receipt, the same idea issued for markets outside the US, often listed in London or Luxembourg.
- Do ADRs have fees?
- Yes. Depositary banks charge a small fee per receipt, usually taken from dividends or charged through the broker.
Related
Not investment advice. Kovered publishes StockTwits watcher, sentiment and message volume readings and counts of public Reddit posts that name a stock or ETF, plus, for listed consumer companies, readings of the brands they own. It does not publish share prices, forecasts, ratings or recommendations to buy, sell or hold anything. Do your own research. Read the full notice.