Stock market basics · updated October 21, 2026
What is an ADR (American Depositary Receipt)
An ADR is a certificate listed on a US exchange that stands for shares in a company from another country, for example Taiwan Semiconductor or Novo Nordisk. You buy it in dollars, like a US stock, and the real shares sit behind it, held by a bank.
How it works
A US bank buys the company's shares on its home exchange, holds them and issues certificates in the US. Each ADR stands for a fixed number of local shares (the ADR ratio). Dividends are paid in dollars, after the bank takes a small fee. The ADR's price follows the home share price, converted into dollars.
Worked example
One ADR stands for 3 local shares, and one local share costs $10 at today's exchange rate.
If the company's home currency weakens against the dollar, the ADR falls even if the home share stands still.
Worth knowing
From Europe you can often buy the share straight on its home exchange, without the ADR. Compare the costs and liquidity of the two.
When an ADR can fool you
The bank's fee: it comes out of dividends, a few cents per certificate. Foreign tax: the dividend may be taxed first in the company's country. Delisting: if the ADR leaves the US, you end up with shares on a foreign exchange.
Related terms
Questions about an ADR
ADR or the share on its home exchange?
Both stand for the same company. Pick whichever has lower fees, better liquidity and a currency that suits you.
These explanations are for information only. They are not a recommendation to buy or sell.
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