American Depositary Share (ADS)

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Definition of 'American Depositary Share (ADS)'

An American depositary share (ADS) is a negotiable certificate issued by a U.S. bank that represents ownership of a foreign stock. The ADS is backed by the foreign shares, which are held in trust by the bank. ADSs trade on U.S. stock exchanges and can be bought and sold just like any other stock.

There are a few reasons why companies choose to issue ADSs. One reason is to raise capital in the U.S. market. Another reason is to increase the visibility of their stock among U.S. investors. ADSs are also often used by companies that want to list their stock on a U.S. stock exchange, but do not meet the listing requirements.

ADSs have a number of advantages over foreign stocks. They are easier to trade, they are more liquid, and they are more transparent. However, they also have some disadvantages. They can be more expensive than foreign stocks, and they may not offer the same level of voting rights.

If you are considering investing in a foreign company, you should carefully consider the pros and cons of ADSs before making a decision. You should also make sure that you understand the risks involved in investing in foreign stocks.

Here are some additional details about ADSs:

* ADSs are typically issued in multiples of 100 shares.
* The price of an ADS is typically based on the price of the underlying foreign shares.
* ADSs are subject to the same market risks as foreign stocks.
* ADSs may not offer the same level of voting rights as foreign stocks.
* ADSs are typically issued by U.S. banks that are members of the Federal Reserve System.

If you have any questions about ADSs, you should consult with a financial advisor.

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