American Depositary Receipt
An American Depositary Receipt (including American Depository Receipt , abbreviated ADR) or American Depositary Share is an on-denominated dollars of US depositary banks (depositary banks) issued in the US depository receipt , of a certain number of deposited shares represented a foreign company and whose place can be traded on the US capital market.
Basics
An ADR is a certificate issued by a US financial institution that has taken the underlying shares into custody. An ADR usually represents a fraction of a share, but it can also be a full share. A transfer of ADR takes place through endorsement and handover. The respective holder of an ADR can at any time request the surrender of the shares held at a foreign custodian bank, usually the branch of the custodian bank in the country of domicile of the foreign company, or their sale on the foreign stock exchange, in return for the transfer of the certificate back to the custodian bank .
ADRs are designed to facilitate doing business in foreign securities in the United States. The ADR can be traded on an American stock exchange without the public company having to undergo the full approval process of the United States Securities and Exchange Commission (SEC), which would otherwise be necessary for a stock exchange listing.
Motives for the issuance of ADRs include the requirements for listing on the stock exchange in the USA, where, for example, only registered shares can be admitted to trading, but not the type of bearer shares that is dominant in Germany .
Another reason for designing ADR programs is that certain American institutional investors, such as government pension funds, life insurance companies, and credit institutions, have restrictions on their investment in foreign securities. Since ADR are treated like American shares, foreign companies can use them without issuing shares on the US capital market.
An ADR can basically be issued in the form of unsponsored or sponsored ADR programs. In the case of unsponsored ADR programs, the initiative comes from an American custodian bank or a dealer. The costs for the ADR program are regularly borne by the investors. In addition, due to the lack of a custody agreement with the foreign company, the custodian bank is not obliged to forward information from the company to investors. Unsponsored ADR programs are not admitted to trading on many exchanges, so that they are of little practical importance.
With sponsored ADR programs, the initiative comes from the issuer and is implemented by the latter in cooperation with the custodian bank. A depositary agreement is concluded, which obliges the custodian bank to take over the issue and redemption of certificates, the exercise of voting rights by the US investor, the distribution of dividends and company information and the maintenance of the program. Most of the costs incurred in sponsored ADR programs are borne by the issuing company. In addition to a private placement, there are three different types of sponsored ADR programs:
Level I.
A Level I program can be used to initiate trading in the US for existing shares in a company on the OTC ( off-exchange trading ) market . However, this cannot be used to raise new capital or list the ADR on a US stock exchange. A Level I program must be filed with the SEC using Form F-6 under the Securities Act (SA). Form F-6 only requires information about the ADR program itself, but not about the foreign issuer behind it. A registration of the deposited shares according to the Securities Exchange Act (SEA) is usually not necessary due to the exception of Rule 12g3-2 (b), as the ADR of a Level I program is neither on a US stock exchange nor in the NASDAQ system should be traded. The information published in the company's home market must be filed with the SEC in an English translation. The significant advantage of a Level I program over higher-level programs is the lack of obligation to report according to US GAAP.
In addition to the Level I to Level III programs aimed at the public, there is the option of a private placement in accordance with Rule 144 A, which is aimed at special institutional buyers (Qualified Institutional Buyers). A private placement has the advantage that no complex registration process is necessary and no US GAAP financial statements are required.
Level II
In order to be listed on a US stock exchange or on the NASDAQ, at least one Level II ADR program must be set up. In addition to Form F-6, the underlying shares must also be registered with the SEC in accordance with the provisions of the SEA and the reporting and disclosure requirements of the respective stock exchange must be observed. The shares are registered with the SEC using Form 20-F , which requires extensive information about the issuer. Financial statements according to US-GAAP must be submitted, key shareholders must be named and information about the management and To make board members. The registration also entails at least an annual reporting obligation to a comparable extent.
Level III
A Level III program is required to raise capital by issuing new shares in the issuer's country of domicile and trading the associated ADR on a US stock exchange. In addition to Form F-6 and Form 20-F, Form F-1 must be submitted; the obligations required there for the disclosure and preparation of annual financial statements according to US GAAP largely correspond to those according to Form 20-F.
Risks
Investor advocates point out that the purchase of ADR may be associated with additional costs and risks in certain situations, in particular with capital increases or the discontinuation of an ADR program.
See also
literature
- J. Böckenhoff, M. Ross: American Depositary Receipts - Structures and Legal Aspects. In: Wertpapier-Mitteilungen . Vol. 47, 1993, pp. 1781-1786 and 1825-1829.
- H. Lendner: American Depositary Receipts - a way for German companies to access the US equity market. In: The auditing. Vol. 50, 1997, pp. 596-608.
- R. Rosen, A. Prechtel: Access of German Companies to the US Capital Market. In: The Bank. 36th vol., 1996, pp. 388-392 et al. 478-482.
Individual evidence
- ↑ American Depositary Receipts ( Memento of the original from June 17, 2011 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF; 39 kB)
- ↑ Stefan Laxhuber: Guest comment: ADR programs should be treated with caution. In: Frankfurter Allgemeine Zeitung . ( faz.net ).
