Stocks question - ADRs?

Question

What are American Depository Receipts and how do they differ from regular stocks?

Answer 1

ADRs are quoted in U S $.  That is the main difference.  They do however represent equity in foreign companies rather that U S companies. In that respect the prices of ADRs are effected by currency fluctionations besides earnings and earnings prospects.  

Answer 2

American depositary receipts, or ADRs, are a bit of financial magic that deliver the world to the doors of US investors.

First introduced by the investment house of JP Morgan in 1927, ADRs are simple in concept. In the most basic terms, A United States bank or investment institution places a certain amount of stock of a foreign company into its vaults - the "depositary" part of the name - then allows investors to buy shares in that collection of stocks, priced in US dollars.

Those shares, or receipts, can then be traded on regular stock markets almost as though they were shares held directly in the foreign company itself, only the arrangement is better for US investors. Since ADRs are traded in US dollars and are securities that originate within the United States, they carry none of the cross-border fees or other hassles that might ensue if an investor from Peoria were to try to buy stock directly in a South Korean steel mill. The worst most investors have to worry about are small fees, often a few pennies per ADR per year, charged by the depository institution to cover their costs of offering the service.

Thus, in a sense, US investors gain access to the world through ADRs without having to leave the comfort of their own living rooms.

ADRs vs. Stocks:

Like normal stocks, ADRs tend to trade at levels that track the financial health of their underlying companies. Still, there are important differences between an ADR and a directly held stock.

For example, there are different flavors of ADRs, each of which carries a different level of reporting responsibility - in other words transparency in reporting their financial health - to US regulators and investors.

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Answer 3

they are the shares foreign companies use to trade on the NYSE.