American Depositary Share
American Depositary Shares (ADS) refer to shares of foreign companies that are listed and traded on a stock exchange in the United States. By issuing ADS, foreign companies can attract more American investors and facilitate investment and trading for them.
Definition: American Depositary Shares (ADS) are shares of foreign companies that are listed and traded on U.S. stock exchanges. By issuing ADS, foreign companies can attract more U.S. investors and facilitate investment and trading for U.S. investors.
Origin: The concept of American Depositary Shares originated in 1927 when J.P. Morgan Bank first issued depositary receipts for the British company Selfridges. Since then, ADS has gradually developed into an important tool for foreign companies to enter the U.S. capital market.
Categories and Characteristics: ADS are typically divided into two categories: Level I ADS and Level II ADS. Level I ADS are not listed on U.S. stock exchanges and are traded over-the-counter, suitable for companies looking to test the waters in the U.S. market. Level II ADS are listed on major U.S. stock exchanges (such as the New York Stock Exchange or NASDAQ), suitable for companies looking to officially trade in the U.S. market. The main characteristics of ADS include: 1. Increasing the company's visibility in the U.S. market; 2. Enhancing the liquidity of the company's stock; 3. Providing U.S. investors with more convenient investment channels.
Specific Cases: 1. Alibaba Group listed on the New York Stock Exchange in 2014 by issuing ADS, becoming one of the largest IPOs in the world at that time. Through ADS, Alibaba successfully attracted a large number of U.S. investors and raised over $25 billion. 2. Baidu Inc. listed on NASDAQ in 2005 by issuing ADS, becoming the first Chinese search engine company to list in the U.S. Through ADS, Baidu not only increased its visibility in the international market but also gained substantial capital support.
Common Questions: 1. What is the difference between ADS and ADR? ADS refers to the shares of foreign companies traded in the U.S., while ADR (American Depositary Receipt) is the certificate representing these shares. 2. What are the risks of investing in ADS? The risks of investing in ADS include exchange rate risk, political risk, and corporate governance risk. Investors should fully understand these risks and manage them accordingly.
