What Is an ADR (American Depositary Receipt)?
In short
An American Depositary Receipt (ADR) is a certificate issued by a US depositary bank that represents shares of a non-US company and trades in US dollars on US markets.
An ADR lets shares of a foreign company be bought and sold in the United States without dealing in the foreign market. A US depositary bank holds the underlying shares outside the United States and issues receipts against them. The receipts are quoted and settled in US dollars, and they trade either on a US exchange such as the NYSE or Nasdaq or over the counter.
One ADR may represent one underlying share, a fraction of a share or several shares, so the ADR price is not the price of one underlying share even after the currency is converted. ADRs can be sponsored, where the company has an agreement with the depositary bank, or unsponsored. The depositary bank can charge custody fees, and dividends are normally paid through it to ADR holders in dollars.
The ADR price is formed in the US market during US hours and in dollars, so it reflects the home-market share, the exchange rate and US trading conditions together. For a company listed at home and as an ADR, the two prices can move at different times when one of the markets is closed. ADRs quoted over the counter can be less liquid than ADRs listed on a national exchange.
How Lzzo.com shows it
The list of US-listed stocks outside the S&P 500 marks ADR listings and over-the-counter ADRs with a label, and the product pages of such companies show the dollar price of the receipt. That price is the receipt's price in the US market with its observation time; it is not a conversion of the home-market price. The Nasdaq-100 methodology also names ADRs as eligible securities.
Related guides
Sources
- U.S. Securities and Exchange Commission, Investor Bulletin: American Depositary Receipts
- U.S. Securities and Exchange Commission, American Depositary Receipts (ADRs), Investor.gov glossary
Primary and official sources, named as plain text.