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Change in Ratio on US ADSs from 1:3 to 1:20

English translation: change in number of ADSs (representing foreign stock) to each corresponding US-traded ADR

GLOSSARY ENTRY (DERIVED FROM QUESTION BELOW)
English term or phrase:Change in Ratio on US ADSs from 1:3 to 1:20
Selected answer:change in number of ADSs (representing foreign stock) to each corresponding US-traded ADR
Entered by: Charles Davis

22:14 Dec 8, 2015
English language (monolingual) [PRO]
Bus/Financial - Finance (general)
English term or phrase: Change in Ratio on US ADSs from 1:3 to 1:20
Change in Ratio on US ADSs from 1:3 to 1:20

I have no hint at all about what this means. It is found from here: http://www.benzinga.com/news/15/12/6013447/update-acorn-inte...


Thank you!
jyuan_us
United States
Local time: 03:11
change in number of ADSs (representing foreign stock) to each corresponding US-traded ADR
Explanation:
In order to understand what this is talking about you first need to know what American Depositary Shares (ADS) are. Foreign (non-US) companies with shares trading on a foreign market can't list those shares directly on US markets. What they have to do is issue ADS (American Depositary Shares), which are equivalent to their own foreign shares. These ADS are held by a depositary bank in the foreign company's home country. Then American Depositary Receipts (ADR) are created; these represent the ADS and are traded on US markets. They are issued by a US bank, which buys a number of the underlying foreign shares and issues dollar-value ADR shares representing the ADS held by the foreign bank, and therefore ultimately the underlying foreign stock. So US investors buy and sell ADR.

The ratio is the number of ADRs to each ADS. It can change, which is what's happened here, from 1:3 to 1:20. The way it's normally expressed, this would mean a change from 1 ADR = 3 ADS to 1 ADR = 20 ADS. Since ADS, held by the foreign depositary bank, normally correspond to the company's common shares, the ratio is in effect the number of underlying shares to each ADR. This number has greatly increased; each ADR being traded in the US has become worth a lot more ADS, representing the underlying foreign shares.

For further details, see the following (the first one is the most enlightening, IMO):

http://www.investopedia.com/ask/answers/06/adrvsads.asp
http://www.investopedia.com/ask/answers/06/adshares.asphttp:...
http://www.investopedia.com/university/adr/adr1.asp?header_a...
Selected response from:

Charles Davis
Spain
Local time: 09:11
Grading comment
4 KudoZ points were awarded for this answer



SUMMARY OF ALL EXPLANATIONS PROVIDED
2 +3ADSs > American Depositary Shares
Taña Dalglish
4change in number of ADSs (representing foreign stock) to each corresponding US-traded ADR
Charles Davis


Discussion entries: 1





  

Answers


13 mins   confidence: Answerer confidence 2/5Answerer confidence 2/5 peer agreement (net): +3
change in ratio on us adss from 1:3 to 1:20
ADSs > American Depositary Shares


Explanation:


Acorn International Announces ADS-to-Share Ratio Change ...
www.prnewswire.com/.../acorn-international-announces-ads-to...
Nov 19, 2015 - ... it will change the ratio of its American depositary shares ("ADSs") to ordinary shares, par value $0.01 per share ("Shares") from 1:3 to 1:20 (the "Ratio Change"). ... For Acorn's ADS holders, this ratio change will have the same effect as ... as amended, and as defined in the U.S. Private Securities Litigation ...

Taña Dalglish
Jamaica
Local time: 02:11
Works in field
Native speaker of: English
PRO pts in category: 15

Peer comments on this answer (and responses from the answerer)
agree  DLyons
39 mins
  -> Thank you Donal.
agree  Veronika McLaren
1 hr
  -> Thank you Veronika.
agree  Tushar Deep
2 hrs
  -> Thank you Tushar.
Login to enter a peer comment (or grade)

3 hrs   confidence: Answerer confidence 4/5Answerer confidence 4/5
change in ratio on us adss from 1:3 to 1:20
change in number of ADSs (representing foreign stock) to each corresponding US-traded ADR


Explanation:
In order to understand what this is talking about you first need to know what American Depositary Shares (ADS) are. Foreign (non-US) companies with shares trading on a foreign market can't list those shares directly on US markets. What they have to do is issue ADS (American Depositary Shares), which are equivalent to their own foreign shares. These ADS are held by a depositary bank in the foreign company's home country. Then American Depositary Receipts (ADR) are created; these represent the ADS and are traded on US markets. They are issued by a US bank, which buys a number of the underlying foreign shares and issues dollar-value ADR shares representing the ADS held by the foreign bank, and therefore ultimately the underlying foreign stock. So US investors buy and sell ADR.

The ratio is the number of ADRs to each ADS. It can change, which is what's happened here, from 1:3 to 1:20. The way it's normally expressed, this would mean a change from 1 ADR = 3 ADS to 1 ADR = 20 ADS. Since ADS, held by the foreign depositary bank, normally correspond to the company's common shares, the ratio is in effect the number of underlying shares to each ADR. This number has greatly increased; each ADR being traded in the US has become worth a lot more ADS, representing the underlying foreign shares.

For further details, see the following (the first one is the most enlightening, IMO):

http://www.investopedia.com/ask/answers/06/adrvsads.asp
http://www.investopedia.com/ask/answers/06/adshares.asphttp:...
http://www.investopedia.com/university/adr/adr1.asp?header_a...

Charles Davis
Spain
Local time: 09:11
Native speaker of: English
PRO pts in category: 82
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