Depositary receipt

A depository receipt allows investors to access overseas shares in their own market and currency.

A depository receipt allows investors to access overseas shares in their own market and currency. Rather than buying an overseas share direct and facing currency issues, plus the headache of trying to buy via an overseas broker, an investor can buy an American Depository Receipt (ADR) in dollars or a Global Depository Receipt (GDR) in sterling or euros instead. This is a separate piece of paper that represents the underlying shares, but is available in the investor's local currency and in their home market.

Typically, a bank will create the ADRs or GDRs by buying shares in the home market and then generating depository receipts according to a ratio say, ten shares to one ADR. An ADR investor then has similar rights to a normal shareholder the ADR can be traded like a share and will also pay dividends, assuming the underlying company offers them.

See Tim Bennett's video tutorial: Depository receipts: An easy way to invest in foreign firms.

Recommended

Modern monetary theory (MMT)
Glossary

Modern monetary theory (MMT)

Modern Monetary theory, or MMT, has become popular on the left, both in the UK and abroad. (Wags say that it stands for "magic money tree".) 
21 Sep 2020
Price to sales ratio
Glossary

Price to sales ratio

A company's market cap divided by the company's annual sales (or revenue) gives us the price/sales ratio.
28 Aug 2020
Too embarrassed to ask: what is a p/e ratio?
Too embarrassed to ask

Too embarrassed to ask: what is a p/e ratio?

Find out how to use the price/earnings ratio (p/e ratio for short) – a useful starting place for investors looking to value a company.
26 Aug 2020
Stock split
Glossary

Stock split

A stock split increases the number of a corporation's issued shares by dividing each existing share.
21 Aug 2020

Most Popular

The next 20 years: five new technologies on the horizon
Global Economy

The next 20 years: five new technologies on the horizon

What will everyday life be like in two decades’ time? Matthew Partridge peers into his crystal ball.
12 Nov 2020
This week’s rally in value stocks is just the beginning
Value investing

This week’s rally in value stocks is just the beginning

The arrival of a vaccine this week saw huge gains in the markets and investors switching out of big-tech growth stocks and into “value” stocks in more…
13 Nov 2020
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
13 Nov 2020