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Accompany you to make money in the US stock market!

The representative of Niuniu class is coming!

Today is the 13th lecture of "20 lectures on American Stock Investment".

Niu friends, please pick up the small bench and come to class together.

When trading partners in the US stock market read the document announcements, they often encounter abbreviated capital letters ADS and ADR, and even some stocks have these abbreviations in their suffixes, such as$Tencent (ADR) (TCEHY.US) $。

So the question is, has Tencent listed on the US stock market?

Wait a minute, let the class representative explain it to you.

What are ADR and ADS?

ADR (American Depository Receipts)American depositary receipts (ADR) are depositary receipts issued to American investors and traded on the American securities market. If it is issued in more than one country, it is called global depositary receipt (GDR).

ADS (American Depository Shares)American Depositary shares, which is the actual underlying stock represented by ADR.

So,It can be understood vividly that ADR is the proof of investors' ownership of ADS, just like the property certificate to the house.When trading, transfer the property certificate, there is no need to move the house here. However, usually a property certificate can only represent a house, but an ADR can represent a number of ADS.

We note the text in the screenshot of Pinduoduo's prospectus: 85600000 American Depositary Shares (American depositary receipts) stands for 342400000 Ordinary Shares (common shares).

With regard to this sentence, many investors must be confused:

1) Why do common shares need to be represented by ADS? can't they be issued directly?

2) can't ADS and common shares be exchanged equally?

For the first question, the following "Why ADR/ADS is issued" section focuses on; for the second question, ADS may also correspond to 1:1 of common stock.

The conversion ratio of ADS and common stock each company has its own consideration in many aspects. However, because the stock price in the US stock market is determined by ADS, some Chinese companies adjust the price of depositary shares to the share prices of similar listed companies in the United States by adjusting the ratio of depositary shares to common shares, so as to be better accepted by local investors in the United States.

Second, why issue ADR/ADS?

After understanding the basic meaning of ADR/ADS, friends must want to ask why Chinese stocks listed in the United States basically choose the way of ADR/ADS listing. Isn't it fragrant to go public directly?

FirstAccording to the relevant policies of the US government, companies registered outside the United States are not allowed to be listed directly in the United States.So if foreign companies want to raise money in the US market, there are two ways:

1) Direct listing:Register a company in the United States, and then pack the main body of the listing into an American company.

2) indirect listing:Listed through ADR/ADS.

Compared with the governments registered in Cayman, Virgin Islands and other places, the US government has more control over listed companies, with long listing time, high cost and heavy taxation, so a large number of companies choose to list indirectly, that is, ADR/ADS listing through American depositary institutions. At present, Chinese companies basically adopt this approach when listed in the United States.

To sum up, listing through ADR/ADS has the following advantages for issuers:

1. Large market capacity and strong fund-raising ability.Taking American depositary receipts as an example, the most prominent feature of the American securities market is the huge market capacity, which enables foreign companies issuing ADR in the United States to raise a large amount of foreign exchange funds in a short period of time, broaden the company's shareholder base, improve its long-term fund-raising capacity, improve the liquidity of corporate securities and spread risks.

2. To avoid the legal requirements of issuing stocks and bonds directly, the listing procedure is simple and the issuing cost is low.

3. Issuing depositary receipts can also attract investors' attention, enhance the exposure of listed companies, expand the shareholder base, and increase stock liquidity.The price of depositary receipts can be adjusted to the share prices of similar listed companies in the United States by adjusting the ratio of depositary receipts, which is convenient for listed companies to enter the American capital market and provides new financing channels.

AndADR/ADS 's approach is also correct.Have an advantage for investors:

1. Trading in US dollars and clearing through an American clearing company familiar to investors

2. ADR for listed transactions must be registered with the Securities and Exchange Commission of the United States, which helps to protect the interests of investors.

3. When a listed company pays dividends, ADR investors can get it in time and pay it in US dollars.

4. Some institutional investors are restricted by investment policies and cannot invest in non-US listed securities. ADR can circumvent these restrictions.

3. What is the difference between ADR/ADS? How to convert the pricing?

1. The face value is different:

Most of the face value of American depositary stocks is only a fraction of the face value of mortgaged stocks, while American depositary receipts mostly use several units (such as 10 shares) as a unit of ADRs.

2. Different initiating methods:

American depositary shares (ADS) are sponsored by stock issuers that want to attract American investors without having to list on the American market. American depositary receipts (ADR) represent the rights and interests of foreign stocks that American citizens can buy. ADR is initiated by banks and brokerage firms.

3. The client is different:

American depositary shares (American Depository Share,ADS) are issued in the United States by a trustee (Trustee) authorized by a foreign company. American depositary receipts are transferable certificates issued by American commercial banks to assist in the trading of foreign securities in the United States.

How ADR/ADS is priced:

The domestic stock price is 5 US dollars.The issuer planned to list in the United States, so it sold a certain amount of shares to Bank of America Corporation and became the bank's ADS (Suppose 1ADS=1 common stock). Then the depositary bankIssue ADR at 2:1So each ADR represents 2 common sharesThe initial theoretical price should be $10.

Now going back to the beginning of the article, cattle friends should know exactly what the relationship between Tencent ADR and Tencent is.

In short, it isTencent deposited some Hong Kong stocks in a custodian bank in Hong Kong.The depositary receipt ADR of the corresponding stock issued by the branch of the corresponding bank in the United States is traded in the United States. The relationship between this ADR and Tencent's Hong Kong stock is 1: 1, but the ADR is traded in the United States, and the stock price fluctuates according to the price fluctuations of Hong Kong stocks during the day.

Welcome to the message area for interaction!

The class representative will select 8 high participation friends in the discussion area and give 188 Niuniu points!

In addition, if you have any thoughts on the current and future courses, please don't hesitate to tell us!

Review of the previous issue of "hand-in-hand teaching you to invest in US stocks":

1、A review of the vicissitudes of the US stock market over the past century!

2、3 minutes to understand the three major exchanges in the United States: new York Stock Exchange, NASDAQ, American Stock Exchange

3、A complete strategy for the trading of popular science and American stocks in 3 minutes

4、Understand the regulatory system of American securities market in one article

5、Teach you how to get information about the US stock market in one minute.

6、Understanding the system of suspension and delisting of US stocks from the "LUCKN COFFEE DRC" incident

7、Listen to Buffett buy index fund, first understand the composition of the U. S. stock index!

8、Before you hit the big player, let's take a look at the new strategy for US stocks.

9、Lucky delisting, some people make a lot of money, just because of the skillful use of the short selling mechanism!

10、Don't you know ETF that even God loves?

Lecture 14 tomorrow, waiting for you to come!

Don't break up until we see you!

Attached course link ~