ADR (American Depositary Receipt)
A certificate that lets shares of a foreign company trade on U.S. exchanges — a route to invest in overseas companies through a U.S. account.
No set formula — a U.S. bank holds shares of a foreign company and lists a corresponding certificate (ADR) on a U.S. exchange so it can be traded in dollars.
An ADR's price reflects both the value of the home-country shares (the underlying) and the exchange rate.
In plain terms
You've probably seen companies that aren't American — like Taiwan's TSMC or China's Alibaba — trading on U.S. exchanges. That's possible thanks to ADRs.
A U.S. bank holds those foreign shares and puts a "certificate for those shares" on the U.S. market so it can be bought and sold in dollars. It's a route through which investors can invest in companies around the world using a U.S. account.
What it tells you
It tells you that a stock trading on a U.S. exchange may in essence be a foreign company (for example, TSM is the ADR of a Taiwanese company).
Through an ADR, you can invest in an overseas company within the U.S. market without currency exchange or an overseas account.
Formula
No set formula — a U.S. bank holds shares of a foreign company and lists a corresponding certificate (ADR) on a U.S. exchange so it can be traded in dollars. (How many underlying shares one ADR represents differs by stock)
What high or low means
An ADR's price reflects both the value of the home-country shares (the underlying) and the exchange rate. When the underlying rises or that country's currency strengthens, the ADR tends to rise as well.
Because trading hours differ between the home market and the U.S. market, temporary price gaps can appear between the ordinary shares and the ADR.
ADRs are affected by exchange rates. Even if the company's share price stays the same, a weaker local currency can lower the ADR's value.
The depositary bank charges a fee (ADR fee), and dividends may be subject to foreign taxes.
Regulatory and political risks in the home country pass straight through to the ADR. It may look like a U.S. stock, but it carries that country's risks.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see SEC-filing-based financial metrics alongside the sector benchmark.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.