ADRs and GDRs, explained

What an ADR is

An American Depositary Receipt is a US-traded certificate representing shares of a foreign company. A depositary bank holds the underlying local shares and issues receipts that trade in dollars on a US exchange or over the counter. One receipt may equal one local share, several, or a fraction — the ADR ratio.

For the investor, an ADR behaves like a US stock: dollar prices, US settlement, dividends converted to dollars (minus the foreign withholding tax and a small depositary fee). GDRs are the same idea listed elsewhere, typically London.

Sponsored levels, in one paragraph

Sponsored ADRs are issued in cooperation with the company. Level 1 trades over the counter with minimal US disclosure; Levels 2 and 3 are exchange-listed with fuller SEC reporting; Level 3 can raise capital. Unsponsored ADRs are set up by banks without the company's involvement and can exist in parallel — fine to know, mostly relevant because disclosure quality differs.

What can go wrong

ADRs can be terminated: the company delists, the depositary ends the program, or regulation intervenes — holders are typically cashed out or left holding local shares they may not be able to keep. Politics reaches ADRs too: audit-access disputes between US and Chinese regulators put the listing status of many Chinese ADRs in question for years. An ADR is convenient access, not immunity from the home market's risks.

Country pages list each market's ADRs →