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Process of getting an ADR

Process of getting an ADR. Synopsis. What is ADR?? Types of ADR Why ADR?? Process of getting an ADR. What is ADR??. An American Depository Receipt is a certificate issued by a bank in the United States representing a certain amount of shares of a foreign company on a foreign exchange.

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Process of getting an ADR

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  1. Process of getting an ADR

  2. Synopsis • What is ADR?? • Types of ADR • Why ADR?? • Process of getting an ADR

  3. What is ADR?? • An American Depository Receipt is a certificate issued by a bank in the United States representing a certain amount of shares of a foreign company on a foreign exchange. • They can be traded on American exchanges just as a domestic stock can be; they make foreign investment much easier.

  4. Example. • ADRs were first introduced in 1927

  5. Types of ADR • Sponsored ADR’s: These ADR’s are created by a bank at the request of the foreign Co. that issued the underlying security. Accounts for over 98% of ADRs 2. Unsponsored ADR’s Unsponsored shares are ADRs that trade on the over-the-counter (OTC) market. These shares have no regulatory reporting requirements and are issued in accordance with market demand.

  6. Why ADR? • ADR’s are denominated in dollars, and can be purchased through the investor’s regular broker. • Dividends are converted to dollars by the custodian and paid to the ADR investor. • ADR price quotes are in US dollars.

  7. ADR’s are registered securities that provide for the protection of ownership rights. • ADR investment can be sold by trading the depository receipt to another investor in the U.S. stock market. • ADR’s represent a multiple of the underlying shares.

  8. Disadvantages • There are some ADR’s that are not listed on large exchanges like NASDAQ or NYSE. They are listed on bulletin boards. • Accounting system may differ. • Fluctuation in currency. • Inflation. • Well informed about Foreign tax treatment.

  9. Process of getting an ADR • Two banks are generally involved in maintaining an ADR on a US exchange: • An investment bank and • A depositary bank.

  10. Process of Creating ADRs DR bank purchases shares of non-U.S. company from the company’s home market DR bank places shares with its custodian in the home market DR bank issues ADRs (denominated in U.S. $)

  11. Stages Involved in ADR • The company shall present its accounts in conformity with US GAAP. US GAAP requires presentation of consolidated financial statements. • Appointment of legal experts, lead managers, investment bankers and their due diligence. • Preparation of the offer document and its vetting by legal counsels. • Filing of the offer document and its review by SEC. • Replying to the comments of SEC and obtaining its clearance. • Road shows and book running. • Appointment of domestic and international depositary. Domestic depositary will act as a custodian of the underlying shares. • Selection of an American Stock Exchange. • Allotment of underlying shares and creation of ADSs. • Listing of ADSs on American Stock Exchange. • Listing of underlying shares with domestic Stock Exchanges

  12. Thank you!

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