What is an American Depositary Receipt (ADR)?

An American Depositary Receipt of “ADR” is a certificate that represents one or more shares (or a fraction of a share) in a foreign stock. Usually, when stocks of foreign companies trade in the U.S. markets, they are traded as American Depositary Receipts. ADRs trade in U.S. dollars with the underlying security held by an overseas U.S. financial institution.

By removing the complexities border and currency issues can create, ADRs provide U.S. investors the opportunity to invest in foreign companies in a simplified manner. ADRs are priced and pay dividends in U.S. dollars while trading like shares of U.S.-based corporations. ADR prices correspond to that of the stock in its home market with an adjustment to the ratio of ADRs to shares in the foreign company.

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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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