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Global Depositary Receipts (GDRs)

Global Depositary Receipts (GDRs) are financial instruments issued by international banks that represent shares in foreign companies. GDRs allow investors to buy and sell shares of foreign companies on domestic stock exchanges, providing a way to gain international exposure without dealing with complex cross-border trading. GDRs are commonly used by companies to raise capital in international markets and attract a broader investor base while offering investors the benefits of global diversification.

Example

A Russian energy company issues GDRs on the London Stock Exchange, enabling European investors to buy its shares without having to trade directly on the Russian stock market.

Key points

• Represent shares of foreign companies and are traded on domestic exchanges.

• Facilitate international investment and capital raising for companies.

• Provide investors with exposure to global markets without cross-border trading complexities.

Quick Answers to Curious Questions

Companies issue GDRs to access international capital markets, increase liquidity, and attract foreign investors by simplifying the trading process.

GDRs offer an easy way to invest in foreign companies, providing global diversification and access to international growth opportunities without dealing with foreign regulations.

Risks include currency risk, political and economic instability in the issuing country, and regulatory differences that may affect investor rights and dividends.