[Economy Q] ADR and GDR

[Economy Q] ADR and GDR

What is ADR and GDR?

Answer

American Depositary Receipt (ADR)

ADR is method of trading non-U.S. stocks on U.S. exchanges

Suppose, Indian Co. wants to raise money from America, by issuing shares in American stock exchange.

But then Indian co. will have to maintain accounts according to American standards.

To prevent this problem, Indian company gives its shares to American bank.

American bank gives that Indian company receipts (called ADR) in return of those shares. Then Indian Co. can trade those ADR receipts in American share market, to raise money.

Global Depository Receipts (GDR)

Serve as same function like GDR, but on Global scale, it helps the countries from third world, to raise money from the stock exchanges in developed countries.

Several international banks issue GDRs, such as JPMorgan, Citigroup, Deutsche Bank, Bank of New York.

Normally 1 GDR = 10 Shares, but not always.