What are ADRs and ADS, foreign stocks traded in the US?
Learn about the differences between depositary receipts—including underlying share ratios, fees, and exchange rate risks—and standard listed stocks.
Table of contents
Remember this first
First, 3 things to remember
- 1ADRs and ADS represent rights to deposited foreign stocks.
- 2Check the number of underlying shares represented by one receipt and the associated fees.
- 3Even if you trade in dollars in the U.S., exchange rate, country, and rights risks remain.
How do they differ from the common stock of US companies?
ADR stands for American Depositary Receipt. It is a structure that allows rights to foreign company shares to be traded in the US market through a depositary institution. ADS stands for American Depositary Share, which refers to the unit of equity for the deposited shares. The two terms are sometimes used interchangeably on trading screens.
Do not assume a stock is an ADR just by looking at the listing exchange or the country of operation. For example, Coupang's U.S.-listed CPNG is Class A common stock of Coupang, Inc. according to its filings. Not all stocks listed in the U.S. that operate in Korea are ADRs of Korean companies.
Adjust for the number of ordinary shares and the exchange rate.
One unit of an ADR/ADS can represent one underlying share, multiple shares, or a fraction of a share. For example, if one receipt represents 2 underlying shares, and the underlying share price is 20, 10 units, and that is 1 dollar, the simple converted value is 4 dollars.
Actual prices may differ from converted values due to trading hours, liquidity, convertibility, costs, and market demand. If there was a ratio change or a split of the underlying shares, check whether past prices, share counts, and EPS have been adjusted on the same basis.
Even if traded in dollars, there are costs and exchange rate risks.
Depositary fees, dividend conversion costs, and local taxes may be deducted from dividends or billed separately. Even when there are no dividends, contractual depositary fees may still apply, so check Form F-6 and the cost provisions of the deposit agreement.
The convenience of trading in U.S. dollars is different from eliminating economic currency risk. Changes in the currency of the underlying shares or the company's revenue currency affect prices and dividends, and Korean investors remain exposed to the KRW/USD exchange rate. Do not assume that the U.S. dividend withholding tax rate applies identically to all ADR dividends.
Voting rights can be exercised through a deposit agreement.
Unlike voting directly as an underlying shareholder, there may be procedures, deadlines, and restrictions when using a depositary institution. Also, distinguish between sponsored programs, where the company participates, and unsponsored programs.
ADRs may be traded on U.S. exchanges or over-the-counter markets. Disclosure levels, accessible brokerages, and liquidity vary, so do not assume all are Nasdaq-listed just by looking at a ticker example. Differences in rights between Class A and B are a matter of the company's separate articles of incorporation.
Risks of program termination and delisting
If a depositary program is terminated, contractual procedures such as conversion to underlying shares, sale, or cash payment may apply. You must check whether your brokerage supports underlying share custody and local trading, as well as the application deadlines and costs.
Risks related to the issuing country's regulations, accounting, and corporate governance also remain. The fact that a stock is traded in the U.S. does not eliminate the risks of foreign operations or exchange rate impacts.
You should not make such assumptions
“Are all foreign-related stocks traded in dollars in the US considered ADRs?”
Structures differ between US corporate common stock, direct listing of foreign common stock, and ADRs. Check the type of security in the disclosure.
Check what you have read.
- Have you verified whether it is an ADR, ADS, or common stock?
- Have you adjusted for the ratio and currency of the underlying shares?
- Have you checked the deposit fees and taxes?
- Have you checked the voting rights and redemption procedures?
Apply what you read to the actual screen
Try it on WAPE
Source and scope of verification
Reviewed · Version 3
- American Depositary Receipts (ADRs): Investor BulletinNew window
SEC Investor.gov · Verify 2026-10-20
ADR, ratio to underlying shares, fees, exchange rates, and proxy voting - Coupang 2025 Form 10-KNew window
Coupang / SEC EDGAR · Verify 2026-10-20
US corporation, NYSE CPNG Class A common stock; not classified as an ADR - How to Read a 10-KNew window
SEC Investor.gov · Verify 2026-10-20
Read the business, risk, financial, and management discussion.
This is educational material for observation and information comprehension. Hypothetical examples do not represent actual stocks or performance and do not provide buy or sell recommendations.