How American Depositary Receipts Work21 Jul 2021 13:18
My apologies for my earlier post. I got the ADR IPO completely wrong. It is SO much better than I thought!!!!
"Investors willing to invest in American Depositary Receipts can purchase them from brokers or dealers. The brokers and dealers obtain ADRs by buying already-issued ADRs in the US financial markets or by creating a new ADR. Already-issued ADR can be obtained from the NASDAQ or NYSE.
Creating a new ADR involves buying the stocks of the foreign company in the issuer’s home market and depositing the acquired shares in a depository bank in the overseas market. The bank then issues ADRs that are equal to the value of the shares deposited with the bank, and the dealer/broker takes the ADR to US financial markets to sell them. The decision to create an ADR depends on the pricing, availability, and demand.
Investors who purchase the ADRs are paid dividends in US dollars. The foreign bank pays dividends in the native currency, and the dealer/broker distributes the dividends in US dollars after factoring in currency conversion costs and foreign taxes. This makes it easy for US investors to invest in a foreign company without worrying about currency exchange rates. The US banks that deal with ADRs require the foreign companies to furnish them with their financial information, which investors use to determine the company’s financial health."
in short, the US broker buys eg 1m ARB shares in the UK market, then resells them on the US market, Every ADR bought in the US has to be bought by the US broker in the UK.
RIOT and MARA trade on 3x-5x ARB market cap. When US investors can buy the ADRs inside 401k tax wrappers, the same way they can buy MARA and RIOT, ARB will take off and stay UP!
DYOR :-))
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