A global depositary receipt (GDR) is the form of bank certificate. The issuance is in more than one country for shares in a foreign company. GDR works to list shares in two or more markets, mostly Euromarkets and U.S. markets. The list is with one fungible security. The use of this bank certificate is when issuer raises capital in the local market, international markets, as well as the U.S. market.
The payment could go through private placement or public stock offerings. GDR (Global Depositary Receipt) is similar to an American depositary receipt (ADR). The difference between GDR and ADR only lies in the list of ADR shares of a foreign country in the U.S. markets. Meanwhile, GDR typically trades on American stock exchanges, Eurozone, as well as Asian exchanges.
The price of GDRs and their dividends are in the local currency of the exchanges where the trading shares occur. This bank certificate is actually an easy liquid way for the U.S. and international investors in order to own foreign stocks. Therefore, it represents shares in a foreign company. The epitome is the foreign branch of an international bank then holds the shares.
The shares commonly trade as domestic shares.
However, various bank branches globally also offer the shares for sale. It is quite useful for private markets to raise capital denominated both in euros and U.S. dollars. Therefore, when private markets attempt to get euros instead of U.S. dollar, GDRs is called as EDRs.
Investors could trade GDRs in multiple markets. This is because GDRs are quite negotiable certificates. Furthermore, capital markets for investors are to facilitate long-term debt instrument trading. Plus, it could help to generate capital. GDR transaction, moreover in the international market sometimes has lower associated cost. It is lower compared to some other mechanisms investors use to trade in foreign securities.
