Series 24: ADRs/International Securities

ADRs/International Securities

Introduced to financial markets in 1927, an American Depository Receipt (ADR) is a security that trades in the U.S. but represents a specified number of shares in a foreign corporation. U.S. banks buy large blocks of shares in foreign companies and hold them in reserve. The banks then sell receipts for these shares to U.S. shareholders. U.S. investors prefer ADRs over foreign stock because they can buy them on U.S. markets (including U.S. stock exchanges) with U.S. dollars. All dividends are also paid in U.S. dollars. ADRs are subject to currency risk because dividends are converted to U.S. dollars by the U.S. bank. Dividends from ADRs are subject to U.S. dividend taxes. The prices of ADRs rise and fall