Investing in stocks and shares comes with its own set of tax laws and financial regulations. That means it’s often easier to buy stuff from people or companies based in the same country as you are. In our overwhelmingly interconnected world, it can be easy to forget that our planet is still made up of different nation-states that have their own laws, currencies and taxes. Actually owning the shares in an overseas company would remove these benefits. Most ADR owners will not bother doing this because the main purpose of an ADR is to keep things in US dollars and under the US legal system. That means an ADR representing 1000 shares in Shell could be exchanged for 1000 real shares in the oil company. Owning an ADR means that you are entitled to ownership in the share(s) that it represents. Some banks even allow investors to buy ADRs that are equivalent to fractions of a share. It could be worth one share or a thousand shares. One ADR doesn’t have to be equal to exactly one stock. They’ll then be able to issue ADRs equivalent to 1000 shares in the oil company. If we go back to our Shell example, a US bank might buy 1000 shares in Shell. These banks will buy actual shares in overseas companies and then issue corresponding ADRs. ‍ How does an ADR work?ĪDRs are usually issued by banks. Another benefit of ADRs is that they mean any dividends a US investor receives from an overseas company will be paid in dollars. Shell is traded on the London Stock Exchange in pounds but ADRs let US investors buy them in dollars. For example, investors in the US can buy ADRs in Royal Dutch Shell - the famous oil company.

They are usually issued by banks and let US investors trade in overseas companies using the US dollar and legal system.

ADRs are tradeable assets that mirror shares in companies issued outside of the US.

Adr american depositary receipt