ADR & its two subcategories

ADR & its two subcategories

ADR stands for "American Depository Receipt" and it's essentially stock of a foreign company held by a bank or trust.  ADR's allow US residents to easily purchase shares in companies in other countries.  Typically, an investor who wants to invest in a European stock (for example), would need a European investment account to do so.  ADR's allow investors to bypass this and buy the stock directly in the US.

ADR's are very convenient ways for US investors to buy international stocks.  For example, Nokia is a company not based in the United States but you can still buy stock in it through its ADR that is traded on American exchanges.

Most ADR's give investors the same rights as a typical American stock, including the right to receive dividends and to vote.

Unsponsored ADR

An ADR that is issued by a broker/dealer or depositary bank without the involvement of the company whose stock underlies the ADR.

Sponsored ADR

An ADR which is issued with the cooperation of the company whose stock will underlie the ADR. These shares carry all the rights of the common share, such as voting rights. ADRs must be sponsored in order to be able to trade on the NYSE.