Listen to a Business English Dialogue About Depositary receipt
Alexander: Samantha, have you ever heard of a depositary receipt?
Samantha: No, what is it?
Alexander: A depositary receipt is a certificate issued by a bank representing shares of a foreign company’s stock, allowing investors to trade those shares on a foreign stock exchange without having to directly own the shares.
Samantha: How does a depositary receipt work?
Alexander: When a company wants to list its shares on a foreign stock exchange, it works with a bank to issue depositary receipts, which are then traded on the foreign exchange, providing investors with access to the company’s stock without the need for international brokerage accounts.
Samantha: Are there different types of depositary receipts?
Alexander: Yes, there are two main types: American Depositary Receipts (ADRs), which are denominated in US dollars and traded on US stock exchanges, and Global Depositary Receipts (GDRs), which are traded on international stock exchanges and denominated in other currencies.
Samantha: What are the benefits of using depositary receipts?
Alexander: Depositary receipts provide investors with easier access to foreign markets, greater liquidity, and reduced currency exchange risks compared to investing directly in foreign stocks.
Samantha: Can anyone invest in depositary receipts?
Alexander: Yes, depositary receipts are available to investors worldwide, allowing them to diversify their portfolios and access investment opportunities in foreign companies more easily.
Samantha: How are dividends paid to investors holding depositary receipts?
Alexander: Dividends are typically paid to depositary receipt holders in the currency of the depositary receipt, converted from the currency in which the dividends were originally declared by the foreign company.
Samantha: Are there any risks associated with investing in depositary receipts?
Alexander: Yes, risks include currency fluctuations, political and economic instability in the foreign country, and potential differences in accounting standards and regulatory requirements.
Samantha: Thanks for explaining, Alexander. Depositary receipts seem like a useful tool for investors seeking exposure to foreign markets while managing risks associated with international investing.
