If you want to purchase stock in a foreign-based company, but don't want the hassles of a cross-border purchase, you can purchase the company's shares using the American Depository Receipt (ADR). An ADR is a certificate that represents foreign stock ownership, and each ADR is worth a certain number or ordinary shares. Although the term ADR technically means only the physical certificate, it's commonly used to describe both the certificate and the number of shares it represents. If you would rather hold ordinary shares instead of an ADR, you must convert the shares through a broker.
Contact your stockbroker. Although investors occasionally purchase ordinary shares directly from the company, ADRs must be purchased through a registered broker or investment advisor. When you speak to the broker, explain that you would like to convert the ADR to the number of shares listed on the certificate. There is no set rule that states how many shares each ADR must equal; that decision is left to the company offering the ADR. Some ADRs have a 1-to-1 receipt to share ratio, while others have 3-to-1 or more.
Cancel the ADRs through your broker. When you cancel the ADRs, your account custodian will deposit the ordinary shares into your account.
Provide your broker with delivery instructions. You can keep the shares in your current investment account, or transfer the shares into a new account. If you transfer the shares to a new account, you'll need to give the broker new stock delivery instructions.
Items you will need
- Broker contact information
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