There are few issues with that:
- Complexity of the purchase
- Currency conversion issues
- Difficulty in transactions
and so on.
You see so many people on Twitter saying
"Infosys ADR is up 5% today."
"ICICI Bank and HDFC Bank ADR ended highly positive today. Good move coming up for Banknifty."
Have you ever wondered what is ADR? You're not alone.
Time for a thread. ๐๐๐
There are few issues with that:
- Complexity of the purchase
- Currency conversion issues
- Difficulty in transactions
and so on.
"what if people could trade foreign companies
- in our country
- in our currency
- but without the companies having to list themselves here?"
ADR was born.
It's like a share certificate, issued by a U.S depository bank (like CDSL here), but on a foreign company.
Usually one ADR unit represents one share of the foreign company.
The depository bank buys the foreign company shares in the foreign exchange.
This depository bank holds the purchased shares as inventory.
It issues respective ADR for domestic trading.
The ADR is issued & traded in US Dollars.
It will then list those shares as ADR Units costing ~$18 per ADR unit in the US exchanges.
It's usually listed in NYSE or NASDAQ, sometimes Over-The-Counter too.
i) Sponsored ADR:
- Company enters into a legal agreement with a specific depository bank
- Lists the ADR through the depository
- Company retains control over the ADRs
- A depository bank in the US issues ADR by itself
- without any permission or involvement from the actual company whose shares it is listing as ADR.
There may be many unsponsored ADRs, but there could be only one sponsored ADR.
If ITC doesn't show an interest in doing ADR the sponsored way, the depository can list it as an unsponsored ADR, and name it ITCU, pricing it at $3 per ADR.
i) Level 1:
- ADRs won't be listed on an exchange.
- Company can't raise capital
- Very loose regulatory requirements from SEC
- Highly speculative
- Only trades OTC
- Inexpensive way for a company to gauge US investor interest.
- Can't be used to raise capital
- Trades on an exchange
- Slightly more regulatory requirements from SEC compared to level 1
- Higher visibility + trading volume since listed in an exchange
It should also file Form 20-F (equivalent of Form 10-K annual report) annually.
In the filings, it has to follow the U.S GAAP financial reporting standards.
- Most prestigious type of sponsored ADR, highest level a company can get.
- Very strict rules imposed by SEC on the company.
- Foreign company can raise capital also.
- Issuing companies are subject to full reporting requirements.
listing to raise capital on NYSE/NASDAQ requires for the company to file Form F-1 with SEC.
Apart from this, the company must file Form 20-F annually, and updates on any news announcements.
Dividends will be net of currency conversion expenses and foreign taxes.
Due to taxes being covered, U.S investors seek credit from the IRS to avoid double taxation on cap gains.
In case of sponsored ADRs, either the foreign company or the depository bank can choose to cancel/terminate the issue.
- the company/depository will inform the ADR holders,
- give them the option to swap the ADRs for the actual company shares (listed in the foreign exchange).
The holders can register with a broker (like Zerodha) to take possession.
Holders will continue to collect dividends.
It will be the equivalent of an unlisted company shares.
Currency conversion is one of the hurdles.
Regulatory differences pose another significant hurdle.
But, since they are from U.S, they'd only be familiar with U.S GAAP.
So, this renders into a confusing situation where they may misunderstand some reporting elements.
A company can also list in any other country following this format.
Such securities are called Global Depository Receipts (GDRs).
More from Shravan Venkataraman ๐ฅ๐๐ฐ
Have you ever had 4-5 profitable trades in a row, and you bet all your profits on your next trade feeling "in the zone" only to lose it all?
That's called as "hot-hand fallacy" bias.
I ran a poll recently to outline two classic biases we have as humans.
Thread below ๐๐
1/ *Hot-Hand Fallacy* first had its origin in the game of basketball.
If a player shoots few baskets in a row, people generally predict that the next shot will also be a basket.
This is ignoring the fact that each shot is independent of the ones that came prior.
2/ In this poll, 41.1% people voted that the batsman who hit 4 sixes in a row, will hit a sixer in the 5th ball also.
This is classic hot-hand fallacy.
Each ball's outcome is independent.
The probability is not 50% FYI (number of outcomes is not 2).
These 148 people who voted that the next ball will also be a sixer, did so because they believe that the batsman is on a hot streak, and that his streak would continue.
This is an emotional bias and is usually attached to human performance related events only.
3/ 45.3% (162) people voted that the 5th ball would be a dot ball, meaning the batsman wouldn't score anything.
These people displayed the classic "negative-recency" bias, which is also called the "Gambler's Fallacy".
That's called as "hot-hand fallacy" bias.
I ran a poll recently to outline two classic biases we have as humans.
Thread below ๐๐
Let's say you see a cricketer hit four 6's in a row.
— Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0 (@theBuoyantMan) December 30, 2020
If you have to bet on the next ball's outcome, what would you bet on?
1/ *Hot-Hand Fallacy* first had its origin in the game of basketball.
If a player shoots few baskets in a row, people generally predict that the next shot will also be a basket.
This is ignoring the fact that each shot is independent of the ones that came prior.
2/ In this poll, 41.1% people voted that the batsman who hit 4 sixes in a row, will hit a sixer in the 5th ball also.
This is classic hot-hand fallacy.
Each ball's outcome is independent.
The probability is not 50% FYI (number of outcomes is not 2).
These 148 people who voted that the next ball will also be a sixer, did so because they believe that the batsman is on a hot streak, and that his streak would continue.
This is an emotional bias and is usually attached to human performance related events only.
3/ 45.3% (162) people voted that the 5th ball would be a dot ball, meaning the batsman wouldn't score anything.
These people displayed the classic "negative-recency" bias, which is also called the "Gambler's Fallacy".
Hedge Funds spend millions of dollars per year to access high quality financial datasets.
Retail sources cost anywhere from $5k-50k per year.
But, here are 11 data sources that have HIGH QUALITY and FREE data you can access right away.
๐งต ๐
1/ Alpha Vantage | https://t.co/ExlS7Jdnsz
Provides real time & historical equities, forex, and cryptocurrencies data across 60+ exchanges.
They provide both intraday and D/W/M timeframe data.
You can also access economic & fundamental data for last 20 years through them.
2/ IEX | https://t.co/drqeoU8Ee1
Investors Exchange provides historical data going back upto 15 years for US equities through API access.
You'll need an API key in order to access the API.
3/ EconDB | https://t.co/6mZxDeaJfh
This website provides economic data and economic indicators for almost all the countries in the world.
You can search for your preferred dataset through their search engine here
4/ Quandl | https://t.co/fW4PEQaW66
Quandl has financial and alternate data across 50+ exchanges, from over 300 sources.
They also have information on capital markets, energy, shipping, healthcare, education, demography, economics and society.
Retail sources cost anywhere from $5k-50k per year.
But, here are 11 data sources that have HIGH QUALITY and FREE data you can access right away.
๐งต ๐
1/ Alpha Vantage | https://t.co/ExlS7Jdnsz
Provides real time & historical equities, forex, and cryptocurrencies data across 60+ exchanges.
They provide both intraday and D/W/M timeframe data.
You can also access economic & fundamental data for last 20 years through them.
2/ IEX | https://t.co/drqeoU8Ee1
Investors Exchange provides historical data going back upto 15 years for US equities through API access.
You'll need an API key in order to access the API.
3/ EconDB | https://t.co/6mZxDeaJfh
This website provides economic data and economic indicators for almost all the countries in the world.
You can search for your preferred dataset through their search engine here
4/ Quandl | https://t.co/fW4PEQaW66
Quandl has financial and alternate data across 50+ exchanges, from over 300 sources.
They also have information on capital markets, energy, shipping, healthcare, education, demography, economics and society.
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I'm going to do two history threads on Ethiopia, one on its ancient history, one on its modern story (1800 to today). ๐ช๐น
I'll begin with the ancient history ... and it goes way back. Because modern humans - and before that, the ancestors of humans - almost certainly originated in Ethiopia. ๐ช๐น (sub-thread):
The first likely historical reference to Ethiopia is ancient Egyptian records of trade expeditions to the "Land of Punt" in search of gold, ebony, ivory, incense, and wild animals, starting in c 2500 BC ๐ช๐น
Ethiopians themselves believe that the Queen of Sheba, who visited Israel's King Solomon in the Bible (c 950 BC), came from Ethiopia (not Yemen, as others believe). Here she is meeting Solomon in a stain-glassed window in Addis Ababa's Holy Trinity Church. ๐ช๐น
References to the Queen of Sheba are everywhere in Ethiopia. The national airline's frequent flier miles are even called "ShebaMiles". ๐ช๐น
I'll begin with the ancient history ... and it goes way back. Because modern humans - and before that, the ancestors of humans - almost certainly originated in Ethiopia. ๐ช๐น (sub-thread):
The famous \u201cLucy\u201d, an early ancestor of modern humans (Australopithecus) that lived 3.2 million years ago, and was discovered in 1974 in Ethiopia, displayed in the national museum in Addis Ababa \U0001f1ea\U0001f1f9 pic.twitter.com/N3oWqk1SW2
— Patrick Chovanec (@prchovanec) November 9, 2018
The first likely historical reference to Ethiopia is ancient Egyptian records of trade expeditions to the "Land of Punt" in search of gold, ebony, ivory, incense, and wild animals, starting in c 2500 BC ๐ช๐น
Ethiopians themselves believe that the Queen of Sheba, who visited Israel's King Solomon in the Bible (c 950 BC), came from Ethiopia (not Yemen, as others believe). Here she is meeting Solomon in a stain-glassed window in Addis Ababa's Holy Trinity Church. ๐ช๐น
References to the Queen of Sheba are everywhere in Ethiopia. The national airline's frequent flier miles are even called "ShebaMiles". ๐ช๐น