American Depositary Receipts (ADRs)

What this video covers

• How an ADR is created: custodian bank overseas, then U.S. depositary bank, then trading on U.S. markets, and why the IPO restricted-person rules do not apply
• The exact differences between sponsored and unsponsored ADRs on company involvement, SEC reporting, exchange eligibility, transparency, and voting rights
• Why unsponsored ADRs trade over-the-counter (OTC) only and never on major exchanges
• Why currency risk survives every ADR structure even though ADRs trade in U.S. dollars
• How political risk and inflationary risk layer onto the foreign investment beyond currency effects
• The dividend flow: declared in foreign currency, converted to U.S. dollars by the depositary bank, with the investor bearing conversion risk
• Why foreign tax withholding on ADR dividends may qualify for a U.S. foreign tax credit rather than being pure double taxation