ADR is a certificate issued by U.S. banks, representing foreign company shares, allowing U.S. investors to trade international stocks on American exchanges.
An example of an ADR is Alibaba Group’s ADR on the NYSE, allowing U.S. investors to invest in Alibaba without trading on foreign exchanges.
An ADR works by representing foreign company shares, issued by U.S. banks, allowing American investors to trade them on U.S. exchanges without overseas involvement.
Types of ADRs are Level I (minimal rules), Level II (listed, SEC compliance), Level III (capital raising), Rule 144A (private), Sponsored (company involved), & Unsponsored.
ADRs simplify foreign stock trading for U.S. investors, offer dividends in USD, ensure SEC compliance, reduce currency risk, enhance liquidity, and improve market access.
ADRs may have higher fees, currency risk, limited voting rights, complex taxes, liquidity issues, reliance on agreements & exposure to foreign market risks.