American depository Shares (ADS)

American depository Shares (ADS)

American Depository Shares (ADS) are very similar to American Depository Receipts (ADR), but they represent a different type of underlying security. While ADRs represent ownership of shares in a foreign company, ADSs represent ownership of shares in a non-US company that is traded on a non-US stock exchange.

ADSs are issued by US banks or brokerages and can be traded on US stock exchanges, allowing US investors to purchase and sell shares in non-US companies. Like ADRs, ADSs offer US investors the ability to invest in foreign companies without the need to directly purchase foreign securities or manage foreign currency transactions.

ADSs may also be sponsored or unsponsored. A sponsored ADS is issued with the cooperation of the foreign company and may have certain rights and benefits, such as the ability to vote on shareholder matters. An unsponsored ADS is not issued with the cooperation of the foreign company and may have fewer rights and benefits.

As with ADRs, investing in ADSs comes with risks, including currency exchange rate risk and the risk that the ADS may not accurately reflect the value of the underlying shares in the foreign company. Investors should carefully consider these risks before investing in ADSs.

An American Depositary Share (ADS) is a U.S. dollar denominated form of equity ownership in a non-U.S. company. It represents the foreign shares of the company held on deposit by a custodian bank in the company’s home country and carries the corporate and economic rights of the foreign shares, subject to the terms specified on the ADR certificate.  One or several ADS’s can be represented by a physical ADR certificate. The terms ADR and ADS are often used interchangeably. ADSs provide U.S. investors with a convenient way to invest in overseas securities and to trade non-U.S. securities in the U.S. ADSs are issued by a depository bank, such as JP Morgan Chase Bank. They are traded in the same manner as shares in U.S. companies, on the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX) or quoted on NASDAQ and the over-the-counter (OTC) market. Although ADSs are U.S. dollar denominated securities and pay dividends in U.S. dollars, they do not eliminate the currency risk associated with an investment in a non-U.S. company.

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