American Depositary Receipts (ADRs)

Definition:

Negotiable certificates issued as equity securities in the United States, representing an ownership interest denominated in US dollars in a pool of equity securities issued by a Foreign Private Issuer and denominated in a foreign currency. ADR owners have the right to obtain the foreign stock the ADR represents, but US investors usually find it more convenient to own the ADR. The underlying securities are referred to as American Depositary Shares or ADSs, and are held by a Depository. Essentially, ADRs allow shares of a Foreign Private Issuer to trade in the United States in US dollars. The price of an ADR corresponds to the price of the foreign stock in its home market, adjusted to the ratio of the ADRs to foreign company shares. Depending on the type of Depository facility chosen by the Foreign Private Issuer, the ADRs may or may not require registration with the SEC.

Compare with Global Depositary Receipts (GDRs), which are certificates denominated in a foreign currency and representing interests in the securities of a Foreign Private Issuer.