SlideShare a Scribd company logo
1 of 7
Global Depositary Receipts (GDRs)
Depositary receipts (DRs) are certificates that represent an ownership interest in the ordinary shares of
stock of a company, but that are marketed outside of the company’s home country to increase its
visibility in the world market and to access a greater amount of investment capital in other countries.
Depositary receipts are structured to resemble typical stocks on the exchanges that they trade so that
foreigners can buy an interest in the company without worrying about differences in currency,
accounting practices, or language barriers, or be concerned about the other risks in investing in foreign
stock directly.
American depositary receipts (ADRs) were the 1st depositary receipts issued—JP Morgan issued the 1st
ADR in 1927. ADRs allowed companies domiciled outside of the United States to tap the United States
capital markets. ADRs were structured to resemble other stocks on the American exchanges with
comparable prices per share, shareholder notifications in English, and the use of United States currency
for the sale and purchase of ADRs and for dividend payments.
A global depositary receipt (GDR) is similar to an ADR, but is a depositary receipt sold outside of the
United States and outside of the home country of the issuing company. Most GDRs are, regardless of the
geographic market, denominated in United States dollars, although some trade in Euros or British
sterling. There are more than 900 GDR’s listed on exchanges worldwide, with more than 2,100 issuers
from 80 countries.
Although ADRs were the most prevalent form of depositary receipts, the number of GDRs has recently
surpassed ADRs because of the lower expense and time savings in issuing GDRs, especially on the
London and Luxembourg stock exchanges.
Bar chart showing the growth of global depositary receipts and the relative shinkage of American
depositary receipts.
Source: JP Morgan
The Global Depositary Receipt as a Financial Instrument
A GDR is issued and administered by a depositary bank for the corporate issuer. The depositary bank is
usually located, or has branches, in the countries in which the GDR will be traded. The largest depositary
banks in the United States are JP Morgan, the Bank of New York Mellon, and Citibank.
A GDR is based on a Deposit Agreement between the depositary bank and the corporate issuer, and
specifies the duties and rights of each party, both to the other party and to the investors. Provisions
include setting record dates, voting the issuer’s underlying shares, depositing the issuer’s shares in the
custodian bank, the sharing of fees, and the execution and delivery or the transfer and the surrender of
the GDR shares.
A separate custodian bank holds the company shares that underlie the GDR. The depositary bank buys
the company shares and deposits the shares in the custodian bank, then issues the GDRs representing
an ownership interest in the shares. The DR shares actually bought or sold are called depositary shares.
The custodian bank is located in the home country of the issuer and holds the underlying corporate
shares of the GDR for safekeeping. The custodian bank is generally selected by the depositary bank
rather than the issuer, and collects and remits dividends and forwards notices received from the issuer
to the depositary bank, which then sends them to the GDR holders. The custodian bank also increases or
decreases the number of company shares held per instructions from the depositary bank.
The voting provisions in most deposit agreements stipulate that the depositary bank will vote the shares
of a GDR holder according to his instructions; otherwise, without instructions, the depositary bank will
not vote the shares.
GDR Advantages and Disadvantages
GDRs, like ADRs, allow investors to invest in foreign companies without worrying about foreign trading
practices, different laws, accounting rules, or cross-border transactions. GDRs offer most of the same
corporate rights, especially voting rights, to the holders of GDRs that investors of the underlying
securities enjoy.
Other benefits include easier trading, the payment of dividends in the GDR currency, which is usually the
United States dollar (USD), and corporate notifications, such as shareholders’ meetings and rights
offerings, are in English. Another major benefit to GDRs is that institutional investors can buy them, even
when they may be restricted by law or investment objective from buying shares of foreign companies.
GDRs also overcome limits on restrictions on foreign ownership or the movement of capital that may be
imposed by the country of the corporate issuer, avoids risky settlement procedures, and eliminates local
or transfer taxes that would otherwise be due if the company’s shares were bought or sold directly.
There are also no foreign custody fees, which can range from 10 to 35 basis points per year for foreign
stock bought directly.
GDRs are liquid because the supply and demand can be regulated by creating or canceling GDR shares.
GDRs do, however, have foreign exchange risk if the currency of the issuer is different from the currency
of the GDR, which is usually USD.
The main benefit to GDR issuance to the company is increased visibility in the target markets, which
usually garners increased research coverage in the new markets; a larger and more diverse shareholder
base; and the ability to raise more capital in international markets.
GDR Market
As derivatives, depositary receipts can be created or canceled depending on supply and demand. When
shares are created, more corporate stock of the issuer is purchased and placed in the custodian bank in
the account of the depositary bank, which then issues new GDRs based on the newly acquired shares.
When shares are canceled, the investor turns in the shares to the depositary bank, which then cancels
the GDRs and instructs the custodian bank to transfer the shares to the GDR investor. The ability to
create or cancel depositary shares keeps the depositary share price in line with the corporate stock
price, since any differences will be eliminated through arbitrage.
The price of a GDR primarily depends on its depositary ratio (aka DR ratio), which is the number of GDRs
to the underlying shares, which can range widely depending on how the GDR is priced in relation to the
underlying shares; 1 GDR may represent an ownership interest in many shares of corporate stock or
fractional shares, depending on whether the GDR is priced higher or lower than corporate shares.
Most GDRs are priced so that they are competitive with shares of like companies trading on the same
exchanges as the GDRs. Typically, GDR prices range from $7 - $20. If the GDR price moves too far from
the optimum range, more GDRs will either be created or canceled to bring the GDR price back within the
optimum range determined by the depositary bank. Hence, more GDRs will be created to meet
increasing demand or more will be canceled if demand is lacking or the price of the underlying company
shares rises significantly.
Most of the factors governing GDR prices are the same that affects stocks: company fundamentals and
track record, relative valuations and analysts’ recommendations, and market conditions. The
international status of the company is also a major factor.
On most exchanges, GDRs trade just like stocks, and also have a T+3 settlement time in most
jurisdictions, where a trade must be settled within 3 business days of the trading exchange.
The exchanges on which the GDR trades are chosen by the company. Currently, the stock exchanges
trading GDRs are the:
London Stock Exchange
Luxembourg Stock Exchange
NASDAQ Dubai
Singapore Stock Exchange
Hong Kong Stock Exchange
Companies choose a particular exchange because it feels the investors of the exchange’s country know
the company better, because the country has a larger investor base for international issues, or because
the company’s peers are represented on the exchange. Most GDRs trade on the London or Luxembourg
exchanges because they were the 1st to list GDRs and because it is cheaper and faster to issue a GDR for
those exchanges.
Many GDR issuers also issue privately placed ADRs to tap institutional investors in the United States. The
market for a GDR program is broadened by including a 144A private placement offering to Qualified
Institutional Investors in the United States. An offering based on SEC Rule 144A eliminates the need to
register the offering under United States security laws, thus saving both time and expense. However, a
144A offering must, under Rule 12g3-2(b), provide a home country disclosure in English to the SEC or
the information must be posted on the company’s website.
The Details of a GDR Purchase by An Investor
An investor calls her broker to buy GDRs for a particular company.
The broker fills the order by either buying the GDRs on any of the exchanges that it trades, or by buying
ordinary company shares in the home market of the company by using a broker in the issuer's country.
The foreign broker then delivers the shares to the custodian bank.
The investor’s broker notifies the depositary bank that ordinary shares have been purchased in the
issuer's market and will be delivered to the custodian bank and requests depositary shares to be issued
in the investor’s account.
The custodian notifies the depositary bank that the shares have been credited to the depositary bank’s
account.
The depositary bank notifies the investor’s broker that the GDRs have been delivered.
The broker then debits the account of the investor for the GDR issuance fee.
The Details of a GDR Sale by an Investor
An investor instructs his broker to sell his GDRs. The investor must deliver the shares within 3 business
days if the shares are not in the street name of the broker.
The broker can either sell the shares on the exchanges where the GDR trades, or the GDRs can be
canceled, and converted into the ordinary shares of the issuing company.
If the broker sells the shares on an exchange, then the broker uses the services of a broker in the issuer's
market.
If, instead, the shares are canceled, then the broker will deliver the shares to the depositary bank for
cancellation and provide instructions for the delivery of the ordinary shares of the company issuer. The
investor pays the cancelation fees and any other applicable fees.
The depositary bank instructs the custodian bank to deliver the ordinary shares to the investor’s broker,
who then credits the account of its customer.
If, instead, the shares are canceled, then the broker will deliver the shares to the depositary bank for
cancellation and provide instructions for the delivery of the ordinary shares of the company issuer. The
investor pays the cancelation fees and any other applicable fees.
The depositary bank instructs the custodian bank to deliver the ordinary shares to the investor’s broker,
who then credits the account of its customer.

More Related Content

What's hot (17)

FESE Capital Markets Academy - Derivatives and CCPs
FESE Capital Markets Academy - Derivatives and CCPsFESE Capital Markets Academy - Derivatives and CCPs
FESE Capital Markets Academy - Derivatives and CCPs
 
Financial derivatives
Financial derivativesFinancial derivatives
Financial derivatives
 
88060433 international-money-market-instruments
88060433 international-money-market-instruments88060433 international-money-market-instruments
88060433 international-money-market-instruments
 
Mkt entry strategies
Mkt entry strategiesMkt entry strategies
Mkt entry strategies
 
Derivative(new)
Derivative(new)Derivative(new)
Derivative(new)
 
Duffie krishnamurthy reinhart lehman
Duffie krishnamurthy reinhart lehmanDuffie krishnamurthy reinhart lehman
Duffie krishnamurthy reinhart lehman
 
Fixed Income and Money Market Instu_Final
Fixed Income and Money Market Instu_FinalFixed Income and Money Market Instu_Final
Fixed Income and Money Market Instu_Final
 
Financial derivatives
Financial derivativesFinancial derivatives
Financial derivatives
 
Financial Glossary
Financial GlossaryFinancial Glossary
Financial Glossary
 
Equity
EquityEquity
Equity
 
Derivatives in Islamic Finance - an overview
Derivatives in Islamic Finance - an overviewDerivatives in Islamic Finance - an overview
Derivatives in Islamic Finance - an overview
 
Stock market terms
Stock market termsStock market terms
Stock market terms
 
Chapter12 International Finance Management
Chapter12 International Finance ManagementChapter12 International Finance Management
Chapter12 International Finance Management
 
Bond investment choices
Bond investment choicesBond investment choices
Bond investment choices
 
Chapter 6.Long -Term Financing-Debt
Chapter 6.Long -Term Financing-DebtChapter 6.Long -Term Financing-Debt
Chapter 6.Long -Term Financing-Debt
 
ADR and GDR
ADR and GDRADR and GDR
ADR and GDR
 
Islamic Investment : Call warrant
Islamic Investment : Call warrantIslamic Investment : Call warrant
Islamic Investment : Call warrant
 

Viewers also liked

Global depository receipt
Global depository receiptGlobal depository receipt
Global depository receiptHome
 
Global depository receipt (gdr)
Global depository receipt (gdr)Global depository receipt (gdr)
Global depository receipt (gdr)vishnutc
 
Global Depositary Receipts
Global Depositary ReceiptsGlobal Depositary Receipts
Global Depositary ReceiptsRahul Tilak
 
Global Depository Receipt
Global Depository ReceiptGlobal Depository Receipt
Global Depository ReceiptRanjan Sethi
 
Appointment of directors
Appointment of directorsAppointment of directors
Appointment of directorsAkshada Somani
 

Viewers also liked (6)

Global depository receipt
Global depository receiptGlobal depository receipt
Global depository receipt
 
Global depository receipt (gdr)
Global depository receipt (gdr)Global depository receipt (gdr)
Global depository receipt (gdr)
 
Global Depositary Receipts
Global Depositary ReceiptsGlobal Depositary Receipts
Global Depositary Receipts
 
Global Depository Receipt
Global Depository ReceiptGlobal Depository Receipt
Global Depository Receipt
 
Global depository receipts
Global depository receiptsGlobal depository receipts
Global depository receipts
 
Appointment of directors
Appointment of directorsAppointment of directors
Appointment of directors
 

Similar to Global depositary receipts

Review of Overseas Sources of Finance for Indian Corporate
Review of Overseas Sources of Finance for Indian CorporateReview of Overseas Sources of Finance for Indian Corporate
Review of Overseas Sources of Finance for Indian CorporateNikitaTiloomalani
 
Global Depositary Receipt
Global Depositary ReceiptGlobal Depositary Receipt
Global Depositary ReceiptSunita Sukhija
 
External / Overseas sources of funds for MNCs by Anshika Singh
External / Overseas sources of funds for MNCs by Anshika SinghExternal / Overseas sources of funds for MNCs by Anshika Singh
External / Overseas sources of funds for MNCs by Anshika SinghAnshikaSingh141
 
ADR - American Depository Reciepts - Financial Regulations
ADR - American Depository Reciepts - Financial RegulationsADR - American Depository Reciepts - Financial Regulations
ADR - American Depository Reciepts - Financial RegulationsTanviDeshmukh23
 
V- International Stock Market
V- International Stock MarketV- International Stock Market
V- International Stock MarketDayanand Huded
 
International financing options
International financing optionsInternational financing options
International financing optionssharmahitanshu
 
GDR, Working Mechanism and Features
GDR, Working Mechanism and Features GDR, Working Mechanism and Features
GDR, Working Mechanism and Features Kazim Ehsan
 
International finance
International financeInternational finance
International financeHarish Lunani
 
Money market Instruments.pptx
Money market Instruments.pptxMoney market Instruments.pptx
Money market Instruments.pptxAKHILMANUEL3
 
Money market Instruments.pptx
Money market Instruments.pptxMoney market Instruments.pptx
Money market Instruments.pptxAKHILMANUEL3
 
ADR & GDR ::complete Introduction & Information
ADR & GDR ::complete Introduction & Information ADR & GDR ::complete Introduction & Information
ADR & GDR ::complete Introduction & Information Gaurav Kumar
 
International financial-market-instruments
International financial-market-instrumentsInternational financial-market-instruments
International financial-market-instrumentsnileshsen
 

Similar to Global depositary receipts (20)

Review of Overseas Sources of Finance for Indian Corporate
Review of Overseas Sources of Finance for Indian CorporateReview of Overseas Sources of Finance for Indian Corporate
Review of Overseas Sources of Finance for Indian Corporate
 
Global Depositary Receipt
Global Depositary ReceiptGlobal Depositary Receipt
Global Depositary Receipt
 
External / Overseas sources of funds for MNCs by Anshika Singh
External / Overseas sources of funds for MNCs by Anshika SinghExternal / Overseas sources of funds for MNCs by Anshika Singh
External / Overseas sources of funds for MNCs by Anshika Singh
 
Ppt overseas sources of finance
Ppt overseas sources of financePpt overseas sources of finance
Ppt overseas sources of finance
 
depository recepit
depository recepitdepository recepit
depository recepit
 
Ifm tp
Ifm tpIfm tp
Ifm tp
 
ADR - American Depository Reciepts - Financial Regulations
ADR - American Depository Reciepts - Financial RegulationsADR - American Depository Reciepts - Financial Regulations
ADR - American Depository Reciepts - Financial Regulations
 
V- International Stock Market
V- International Stock MarketV- International Stock Market
V- International Stock Market
 
Adrgdrfinal
AdrgdrfinalAdrgdrfinal
Adrgdrfinal
 
International financing options
International financing optionsInternational financing options
International financing options
 
GDR, Working Mechanism and Features
GDR, Working Mechanism and Features GDR, Working Mechanism and Features
GDR, Working Mechanism and Features
 
ADR and GDR
ADR and GDRADR and GDR
ADR and GDR
 
ADR GDR IDR
ADR GDR IDRADR GDR IDR
ADR GDR IDR
 
International finance
International financeInternational finance
International finance
 
Depository reciepts
Depository recieptsDepository reciepts
Depository reciepts
 
Money market Instruments.pptx
Money market Instruments.pptxMoney market Instruments.pptx
Money market Instruments.pptx
 
Money market Instruments.pptx
Money market Instruments.pptxMoney market Instruments.pptx
Money market Instruments.pptx
 
ADR & GDR ::complete Introduction & Information
ADR & GDR ::complete Introduction & Information ADR & GDR ::complete Introduction & Information
ADR & GDR ::complete Introduction & Information
 
Depository receipts
Depository receiptsDepository receipts
Depository receipts
 
International financial-market-instruments
International financial-market-instrumentsInternational financial-market-instruments
International financial-market-instruments
 

Recently uploaded

TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...
TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...
TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...Nguyen Thanh Tu Collection
 
REPRODUCTIVE TOXICITY STUDIE OF MALE AND FEMALEpptx
REPRODUCTIVE TOXICITY  STUDIE OF MALE AND FEMALEpptxREPRODUCTIVE TOXICITY  STUDIE OF MALE AND FEMALEpptx
REPRODUCTIVE TOXICITY STUDIE OF MALE AND FEMALEpptxmanishaJyala2
 
Application of Matrices in real life. Presentation on application of matrices
Application of Matrices in real life. Presentation on application of matricesApplication of Matrices in real life. Presentation on application of matrices
Application of Matrices in real life. Presentation on application of matricesRased Khan
 
How to Manage Notification Preferences in the Odoo 17
How to Manage Notification Preferences in the Odoo 17How to Manage Notification Preferences in the Odoo 17
How to Manage Notification Preferences in the Odoo 17Celine George
 
Post Exam Fun(da) Intra UEM General Quiz 2024 - Prelims q&a.pdf
Post Exam Fun(da) Intra UEM General Quiz 2024 - Prelims q&a.pdfPost Exam Fun(da) Intra UEM General Quiz 2024 - Prelims q&a.pdf
Post Exam Fun(da) Intra UEM General Quiz 2024 - Prelims q&a.pdfPragya - UEM Kolkata Quiz Club
 
slides CapTechTalks Webinar May 2024 Alexander Perry.pptx
slides CapTechTalks Webinar May 2024 Alexander Perry.pptxslides CapTechTalks Webinar May 2024 Alexander Perry.pptx
slides CapTechTalks Webinar May 2024 Alexander Perry.pptxCapitolTechU
 
size separation d pharm 1st year pharmaceutics
size separation d pharm 1st year pharmaceuticssize separation d pharm 1st year pharmaceutics
size separation d pharm 1st year pharmaceuticspragatimahajan3
 
Dementia (Alzheimer & vasular dementia).
Dementia (Alzheimer & vasular dementia).Dementia (Alzheimer & vasular dementia).
Dementia (Alzheimer & vasular dementia).Mohamed Rizk Khodair
 
Features of Video Calls in the Discuss Module in Odoo 17
Features of Video Calls in the Discuss Module in Odoo 17Features of Video Calls in the Discuss Module in Odoo 17
Features of Video Calls in the Discuss Module in Odoo 17Celine George
 
MichaelStarkes_UncutGemsProjectSummary.pdf
MichaelStarkes_UncutGemsProjectSummary.pdfMichaelStarkes_UncutGemsProjectSummary.pdf
MichaelStarkes_UncutGemsProjectSummary.pdfmstarkes24
 
UNIT – IV_PCI Complaints: Complaints and evaluation of complaints, Handling o...
UNIT – IV_PCI Complaints: Complaints and evaluation of complaints, Handling o...UNIT – IV_PCI Complaints: Complaints and evaluation of complaints, Handling o...
UNIT – IV_PCI Complaints: Complaints and evaluation of complaints, Handling o...Sayali Powar
 
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文中 央社
 
2024_Student Session 2_ Set Plan Preparation.pptx
2024_Student Session 2_ Set Plan Preparation.pptx2024_Student Session 2_ Set Plan Preparation.pptx
2024_Student Session 2_ Set Plan Preparation.pptxmansk2
 
....................Muslim-Law notes.pdf
....................Muslim-Law notes.pdf....................Muslim-Law notes.pdf
....................Muslim-Law notes.pdfVikramadityaRaj
 
Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17
Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17
Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17Celine George
 
Morse OER Some Benefits and Challenges.pptx
Morse OER Some Benefits and Challenges.pptxMorse OER Some Benefits and Challenges.pptx
Morse OER Some Benefits and Challenges.pptxjmorse8
 
Behavioral-sciences-dr-mowadat rana (1).pdf
Behavioral-sciences-dr-mowadat rana (1).pdfBehavioral-sciences-dr-mowadat rana (1).pdf
Behavioral-sciences-dr-mowadat rana (1).pdfaedhbteg
 
Danh sách HSG Bộ môn cấp trường - Cấp THPT.pdf
Danh sách HSG Bộ môn cấp trường - Cấp THPT.pdfDanh sách HSG Bộ môn cấp trường - Cấp THPT.pdf
Danh sách HSG Bộ môn cấp trường - Cấp THPT.pdfQucHHunhnh
 

Recently uploaded (20)

TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...
TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...
TỔNG HỢP HƠN 100 ĐỀ THI THỬ TỐT NGHIỆP THPT VẬT LÝ 2024 - TỪ CÁC TRƯỜNG, TRƯ...
 
REPRODUCTIVE TOXICITY STUDIE OF MALE AND FEMALEpptx
REPRODUCTIVE TOXICITY  STUDIE OF MALE AND FEMALEpptxREPRODUCTIVE TOXICITY  STUDIE OF MALE AND FEMALEpptx
REPRODUCTIVE TOXICITY STUDIE OF MALE AND FEMALEpptx
 
Application of Matrices in real life. Presentation on application of matrices
Application of Matrices in real life. Presentation on application of matricesApplication of Matrices in real life. Presentation on application of matrices
Application of Matrices in real life. Presentation on application of matrices
 
How to Manage Notification Preferences in the Odoo 17
How to Manage Notification Preferences in the Odoo 17How to Manage Notification Preferences in the Odoo 17
How to Manage Notification Preferences in the Odoo 17
 
Post Exam Fun(da) Intra UEM General Quiz 2024 - Prelims q&a.pdf
Post Exam Fun(da) Intra UEM General Quiz 2024 - Prelims q&a.pdfPost Exam Fun(da) Intra UEM General Quiz 2024 - Prelims q&a.pdf
Post Exam Fun(da) Intra UEM General Quiz 2024 - Prelims q&a.pdf
 
slides CapTechTalks Webinar May 2024 Alexander Perry.pptx
slides CapTechTalks Webinar May 2024 Alexander Perry.pptxslides CapTechTalks Webinar May 2024 Alexander Perry.pptx
slides CapTechTalks Webinar May 2024 Alexander Perry.pptx
 
“O BEIJO” EM ARTE .
“O BEIJO” EM ARTE                       .“O BEIJO” EM ARTE                       .
“O BEIJO” EM ARTE .
 
size separation d pharm 1st year pharmaceutics
size separation d pharm 1st year pharmaceuticssize separation d pharm 1st year pharmaceutics
size separation d pharm 1st year pharmaceutics
 
Dementia (Alzheimer & vasular dementia).
Dementia (Alzheimer & vasular dementia).Dementia (Alzheimer & vasular dementia).
Dementia (Alzheimer & vasular dementia).
 
Features of Video Calls in the Discuss Module in Odoo 17
Features of Video Calls in the Discuss Module in Odoo 17Features of Video Calls in the Discuss Module in Odoo 17
Features of Video Calls in the Discuss Module in Odoo 17
 
MichaelStarkes_UncutGemsProjectSummary.pdf
MichaelStarkes_UncutGemsProjectSummary.pdfMichaelStarkes_UncutGemsProjectSummary.pdf
MichaelStarkes_UncutGemsProjectSummary.pdf
 
UNIT – IV_PCI Complaints: Complaints and evaluation of complaints, Handling o...
UNIT – IV_PCI Complaints: Complaints and evaluation of complaints, Handling o...UNIT – IV_PCI Complaints: Complaints and evaluation of complaints, Handling o...
UNIT – IV_PCI Complaints: Complaints and evaluation of complaints, Handling o...
 
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
 
Post Exam Fun(da) Intra UEM General Quiz - Finals.pdf
Post Exam Fun(da) Intra UEM General Quiz - Finals.pdfPost Exam Fun(da) Intra UEM General Quiz - Finals.pdf
Post Exam Fun(da) Intra UEM General Quiz - Finals.pdf
 
2024_Student Session 2_ Set Plan Preparation.pptx
2024_Student Session 2_ Set Plan Preparation.pptx2024_Student Session 2_ Set Plan Preparation.pptx
2024_Student Session 2_ Set Plan Preparation.pptx
 
....................Muslim-Law notes.pdf
....................Muslim-Law notes.pdf....................Muslim-Law notes.pdf
....................Muslim-Law notes.pdf
 
Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17
Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17
Incoming and Outgoing Shipments in 2 STEPS Using Odoo 17
 
Morse OER Some Benefits and Challenges.pptx
Morse OER Some Benefits and Challenges.pptxMorse OER Some Benefits and Challenges.pptx
Morse OER Some Benefits and Challenges.pptx
 
Behavioral-sciences-dr-mowadat rana (1).pdf
Behavioral-sciences-dr-mowadat rana (1).pdfBehavioral-sciences-dr-mowadat rana (1).pdf
Behavioral-sciences-dr-mowadat rana (1).pdf
 
Danh sách HSG Bộ môn cấp trường - Cấp THPT.pdf
Danh sách HSG Bộ môn cấp trường - Cấp THPT.pdfDanh sách HSG Bộ môn cấp trường - Cấp THPT.pdf
Danh sách HSG Bộ môn cấp trường - Cấp THPT.pdf
 

Global depositary receipts

  • 1. Global Depositary Receipts (GDRs) Depositary receipts (DRs) are certificates that represent an ownership interest in the ordinary shares of stock of a company, but that are marketed outside of the company’s home country to increase its visibility in the world market and to access a greater amount of investment capital in other countries. Depositary receipts are structured to resemble typical stocks on the exchanges that they trade so that foreigners can buy an interest in the company without worrying about differences in currency, accounting practices, or language barriers, or be concerned about the other risks in investing in foreign stock directly. American depositary receipts (ADRs) were the 1st depositary receipts issued—JP Morgan issued the 1st ADR in 1927. ADRs allowed companies domiciled outside of the United States to tap the United States capital markets. ADRs were structured to resemble other stocks on the American exchanges with comparable prices per share, shareholder notifications in English, and the use of United States currency for the sale and purchase of ADRs and for dividend payments. A global depositary receipt (GDR) is similar to an ADR, but is a depositary receipt sold outside of the United States and outside of the home country of the issuing company. Most GDRs are, regardless of the geographic market, denominated in United States dollars, although some trade in Euros or British sterling. There are more than 900 GDR’s listed on exchanges worldwide, with more than 2,100 issuers from 80 countries. Although ADRs were the most prevalent form of depositary receipts, the number of GDRs has recently surpassed ADRs because of the lower expense and time savings in issuing GDRs, especially on the London and Luxembourg stock exchanges. Bar chart showing the growth of global depositary receipts and the relative shinkage of American depositary receipts. Source: JP Morgan The Global Depositary Receipt as a Financial Instrument
  • 2. A GDR is issued and administered by a depositary bank for the corporate issuer. The depositary bank is usually located, or has branches, in the countries in which the GDR will be traded. The largest depositary banks in the United States are JP Morgan, the Bank of New York Mellon, and Citibank. A GDR is based on a Deposit Agreement between the depositary bank and the corporate issuer, and specifies the duties and rights of each party, both to the other party and to the investors. Provisions include setting record dates, voting the issuer’s underlying shares, depositing the issuer’s shares in the custodian bank, the sharing of fees, and the execution and delivery or the transfer and the surrender of the GDR shares. A separate custodian bank holds the company shares that underlie the GDR. The depositary bank buys the company shares and deposits the shares in the custodian bank, then issues the GDRs representing an ownership interest in the shares. The DR shares actually bought or sold are called depositary shares. The custodian bank is located in the home country of the issuer and holds the underlying corporate shares of the GDR for safekeeping. The custodian bank is generally selected by the depositary bank rather than the issuer, and collects and remits dividends and forwards notices received from the issuer to the depositary bank, which then sends them to the GDR holders. The custodian bank also increases or decreases the number of company shares held per instructions from the depositary bank. The voting provisions in most deposit agreements stipulate that the depositary bank will vote the shares of a GDR holder according to his instructions; otherwise, without instructions, the depositary bank will not vote the shares. GDR Advantages and Disadvantages GDRs, like ADRs, allow investors to invest in foreign companies without worrying about foreign trading practices, different laws, accounting rules, or cross-border transactions. GDRs offer most of the same corporate rights, especially voting rights, to the holders of GDRs that investors of the underlying securities enjoy.
  • 3. Other benefits include easier trading, the payment of dividends in the GDR currency, which is usually the United States dollar (USD), and corporate notifications, such as shareholders’ meetings and rights offerings, are in English. Another major benefit to GDRs is that institutional investors can buy them, even when they may be restricted by law or investment objective from buying shares of foreign companies. GDRs also overcome limits on restrictions on foreign ownership or the movement of capital that may be imposed by the country of the corporate issuer, avoids risky settlement procedures, and eliminates local or transfer taxes that would otherwise be due if the company’s shares were bought or sold directly. There are also no foreign custody fees, which can range from 10 to 35 basis points per year for foreign stock bought directly. GDRs are liquid because the supply and demand can be regulated by creating or canceling GDR shares. GDRs do, however, have foreign exchange risk if the currency of the issuer is different from the currency of the GDR, which is usually USD. The main benefit to GDR issuance to the company is increased visibility in the target markets, which usually garners increased research coverage in the new markets; a larger and more diverse shareholder base; and the ability to raise more capital in international markets. GDR Market As derivatives, depositary receipts can be created or canceled depending on supply and demand. When shares are created, more corporate stock of the issuer is purchased and placed in the custodian bank in the account of the depositary bank, which then issues new GDRs based on the newly acquired shares. When shares are canceled, the investor turns in the shares to the depositary bank, which then cancels the GDRs and instructs the custodian bank to transfer the shares to the GDR investor. The ability to create or cancel depositary shares keeps the depositary share price in line with the corporate stock price, since any differences will be eliminated through arbitrage.
  • 4. The price of a GDR primarily depends on its depositary ratio (aka DR ratio), which is the number of GDRs to the underlying shares, which can range widely depending on how the GDR is priced in relation to the underlying shares; 1 GDR may represent an ownership interest in many shares of corporate stock or fractional shares, depending on whether the GDR is priced higher or lower than corporate shares. Most GDRs are priced so that they are competitive with shares of like companies trading on the same exchanges as the GDRs. Typically, GDR prices range from $7 - $20. If the GDR price moves too far from the optimum range, more GDRs will either be created or canceled to bring the GDR price back within the optimum range determined by the depositary bank. Hence, more GDRs will be created to meet increasing demand or more will be canceled if demand is lacking or the price of the underlying company shares rises significantly. Most of the factors governing GDR prices are the same that affects stocks: company fundamentals and track record, relative valuations and analysts’ recommendations, and market conditions. The international status of the company is also a major factor. On most exchanges, GDRs trade just like stocks, and also have a T+3 settlement time in most jurisdictions, where a trade must be settled within 3 business days of the trading exchange. The exchanges on which the GDR trades are chosen by the company. Currently, the stock exchanges trading GDRs are the: London Stock Exchange Luxembourg Stock Exchange NASDAQ Dubai Singapore Stock Exchange Hong Kong Stock Exchange Companies choose a particular exchange because it feels the investors of the exchange’s country know the company better, because the country has a larger investor base for international issues, or because the company’s peers are represented on the exchange. Most GDRs trade on the London or Luxembourg
  • 5. exchanges because they were the 1st to list GDRs and because it is cheaper and faster to issue a GDR for those exchanges. Many GDR issuers also issue privately placed ADRs to tap institutional investors in the United States. The market for a GDR program is broadened by including a 144A private placement offering to Qualified Institutional Investors in the United States. An offering based on SEC Rule 144A eliminates the need to register the offering under United States security laws, thus saving both time and expense. However, a 144A offering must, under Rule 12g3-2(b), provide a home country disclosure in English to the SEC or the information must be posted on the company’s website. The Details of a GDR Purchase by An Investor An investor calls her broker to buy GDRs for a particular company. The broker fills the order by either buying the GDRs on any of the exchanges that it trades, or by buying ordinary company shares in the home market of the company by using a broker in the issuer's country. The foreign broker then delivers the shares to the custodian bank. The investor’s broker notifies the depositary bank that ordinary shares have been purchased in the issuer's market and will be delivered to the custodian bank and requests depositary shares to be issued in the investor’s account. The custodian notifies the depositary bank that the shares have been credited to the depositary bank’s account. The depositary bank notifies the investor’s broker that the GDRs have been delivered. The broker then debits the account of the investor for the GDR issuance fee. The Details of a GDR Sale by an Investor An investor instructs his broker to sell his GDRs. The investor must deliver the shares within 3 business days if the shares are not in the street name of the broker. The broker can either sell the shares on the exchanges where the GDR trades, or the GDRs can be canceled, and converted into the ordinary shares of the issuing company. If the broker sells the shares on an exchange, then the broker uses the services of a broker in the issuer's market.
  • 6. If, instead, the shares are canceled, then the broker will deliver the shares to the depositary bank for cancellation and provide instructions for the delivery of the ordinary shares of the company issuer. The investor pays the cancelation fees and any other applicable fees. The depositary bank instructs the custodian bank to deliver the ordinary shares to the investor’s broker, who then credits the account of its customer.
  • 7. If, instead, the shares are canceled, then the broker will deliver the shares to the depositary bank for cancellation and provide instructions for the delivery of the ordinary shares of the company issuer. The investor pays the cancelation fees and any other applicable fees. The depositary bank instructs the custodian bank to deliver the ordinary shares to the investor’s broker, who then credits the account of its customer.