ADR vs Ordinary Shares: What's the Difference?
American Depositary Receipts (ADRs) let US investors buy foreign companies, but they aren't identical to the underlying ordinary shares. Learn the practical differences.
What an ADR actually is
An American Depositary Receipt is a certificate issued by a US depositary bank. The bank holds the underlying foreign shares abroad; the ADR you buy on a US exchange represents a claim on those shares.
Ratios matter
One ADR does not always equal one ordinary share. The ratio can be 1:1, 2:1, 5:1, or fractional depending on the issuer. Always check the ratio before comparing ADR prices to home-market prices.
Dividends and custody fees
Dividends declared abroad are converted to USD and paid to ADR holders. Most depositary banks charge a small custody fee — a few cents per share per year — usually netted against the dividend or billed separately.
Taxes still cross borders
Foreign dividend withholding tax typically applies to ADR dividends just as it would to the home shares. Applicable tax treaties may reduce the withholding rate; some may be reclaimable.
Liquidity and pricing
The ADR and the ordinary share should track each other closely because arbitrageurs keep them in line. In thinly traded ADRs or during off-hours, the ADR can diverge — always compare with the home market close before drawing conclusions.
How Stockrove handles both
Stockrove indexes both ADRs and ordinary shares separately with their own exchange codes, so a search for the ADR and the home listing returns distinct pages with the correct currency and volume.
Stockrove is for informational and educational purposes only. This article is not financial advice. Data may be delayed or incomplete. Always do your own research before making investment decisions.