Questions About ADRs

Discussion in 'Trading' started by ChadZ1, Mar 9, 2017.

  1. ChadZ1

    ChadZ1

    I was looking at some ADRs on adr.com and noticed some were missing entries for their underlying exchanges e.g. symbols "BIDU" and "DQ". Previously, because I hadn't stopped to think about it, I'd always assumed that any ADR corresponded to a stock that was traded directly on some foreign exchange. This raised some questions for me that I couldn't answer via Google:

    1.) Can someone confirm that it is possible for companies to trade solely through an ADR? How common is this? Roughly what proportion of ADR listings have no underlying exchange?

    2.) Why would a company setup an ADR and not a normal stock listing if it's only traded through the ADR?

    3.) Is looking at the underlying exchange field on adr.com a consistent way of telling if the company is trading directly anywhere else?

    4.) What about indirect trading elsewhere i.e. under another country's equivalent of an ADR? Is there a centralized source for that information that I could check? How common is it for companies with an ADR to have a similar, indirect trading setup in another country?
     
  2. ChadZ1

    ChadZ1

    Does no one know or is my question just really dumb? I actually googled and couldn't find an answer.
     
  3. Tim Smith

    Tim Smith

    Well, since you asked, probably really dumb. :cool:

    Look up the definition of an ADR and work your way back from there....
     
  4. luisHK

    luisHK

    Nah, Tim is beeing harsh, I doubt many posters could answer all your questions even if they were willing to put in the time. It looks like many question for a single OP though, if anyone wants to try to give an answer, I'll be curious to read it.

    Anyway, to begin with :

    http://www.investopedia.com/terms/a/adr.asp

    but it doesn't explain why Baidu is called an ADR in the US.
     
  5. ChadZ1

    ChadZ1

    Yeah, I'd actually skimmed investopedia, but reading it again more thoroughly after your recommendation, I suspect the answer to #2 is that the regulatory requirements are less for an ADR even one that's sponsored level 2 or 3 and trading on one of the major exchanges. Also, it seems in some cases that the governments in which foreign companies reside want to control foreign ownership in a company, and I suspect using an ADR over directly listing allows them to control this better.
     
  6. luisHK

    luisHK

    No idea about the above but it is worth having a closer look at what is called a chinese company, in the case of Baba it is a very complex structure based mostly in the carribeans that receive royalties or orger payments from the chinese activities, which allows foreign investors in a sector otherwise restricted in china- u sure need to double check what iwrit than research it further but structures of so called chinese companies can ne complicated, and after all not that chinese. Anyway more like a complicated than dumb question imo but i ve never asked myself so many questions when trading ADRs, until now ...
     
  7. luisHK

    luisHK

    Sorry i'd misuderstood ur point about foreign ownership and government control, not sure it changes anything though, one would need to take a deeper look at adr and regular listing regulations to figure it out.