American Depositary Share


American Depositary Share (ADS)

Foreign stock issued in the US and registered in the ADR system.

American Depository Share

A certificate issued by an American bank representing a share of a foreign stock the bank holds in trust but that is traded on an American stock exchange. An American depository share is dollar-denominated and entitles the bearer to any dividends and other benefits associated with the single share underlying it. In other words, an American depository share is a single share of an American depository receipt.

American Depositary Share (ADS)

A negotiable U.S. depositary share that represents securities of a non-U.S. company being held in custody. A custodian bank in the issuer's home country holds the foreign shares. An ADS is traded in U.S. dollars in the U.S. markets, and dividends are paid in U.S. dollars. American Depositary Shares are traded in lieu of the underlying foreign securities that remain in custody. See also sponsored American Depositary Receipt.Case Study Trading of American Depositary Shares boomed in the early 2000s, largely because of the increased number of ADSs available to U.S. investors. Foreign companies issued American Depositary Shares as part of their effort to raise funds in the booming U.S. capital markets. Some ADS issues originated from foreign-based corporations with U.S. operations that wanted to offer dollar-denominated ownership shares to their U.S. employees. Foreign companies sometimes issued ADSs to use in acquiring U.S. firms in equity transactions. For example, British Petroleum paid for its acquisition of Chicago-based Amoco Corporation with newly issued American Depositary Shares. These shares offer U.S. investors the opportunity to achieve international diversification without the investors being required to convert dollars for a foreign currency and vice versa. American Depositary Shares also offer liquidity that often surpasses the liquidity of the same firm's ordinary shares. Actively traded ADSs in U.S. markets include Alcatel (France), BP (United Kingdom), Ericsson (Sweden), Nokia (Finland), Royal Dutch Petroleum (Netherlands), and Telefonica (Spain).

American depositary share (ADS).

When a company based overseas wants to sell its shares in the US markets, it can offer them through a US bank, which is known as the depositary.

The depositary bank holds the issuing company's shares, known as American depositary shares (ADSs), and offers them to investors as certificates known as American depositary receipts (ADRs). Each ADR represents a specific number of ADSs.

ADRs are quoted in US dollars and trade on US markets just like ordinary shares. While hundreds are listed on the major exchanges, the majority are traded over the counter, usually because they're too small to meet exchange listing requirements.