Understanding A Foreign Stock

[yakers]

I had some shares (and made a small profit) from shares in Povair plc, (PVARF) but I also see it listed as PRV.L, which I assume is a stock traded in London. I would assume that there would be a 1:1 relationship between the shares but at times there seems to be unaccounted differences.
If a company has filed with the SEC(?) for trading US shares and has foreign shares should they not align? Any reason not to buy the foreign shares?

 

[njhowie]

If you purchase shares on the US market, they are ADRs. ADRs will be some multiple of each share on the foreign exchange - it can be 1:1 or some other multiple.

Read up on how they work:
https://www.aaii.com/investing-basics/article/american-depositary-receipts?

https://www.fool.com/investing/2018/10/24/what-is-an-adr-and-how-does-it-differ-from-regular.aspx

 

[qwerty3656]

I use fidelities foreign trading group to trade some shares - even though I trade them on London exchange, they appear in my account as the US adr. When I sell them (with the foreign trading group), they trade at the current London bid/ask. I can also purchase/sell the adr directly, but there is much less volume and, as you say, the values don't tie that well to the underlying foreign stock. Fidelity charges a fee to trade with their foreign trading group, but I cannot trade on the London exchange directly (this may be because it's in an ira).

 

[chassis]

What are the costs or expenses for a retail investor, related to buying and selling ADRs? Wikipedia and investopedia didn't answer it for me. Thanks.

 

[njhowie]

What are the costs or expenses for a retail investor, related to buying and selling ADRs? Wikipedia and investopedia didn't answer it for me. Thanks.

ADRs trade as any other stock on a US exchange. Whatever you pay your broker for trading a stock on NYSE or NASDAQ or where ever the shares trade is how much you'd pay. There are no extra or different fees for purchasing/selling ADRs.

 

[NW-Bound]

While there is no additional cost for trading ADR, the institution who sponsors the ADR will charge a periodic fee, not too different than expenses charged by a mutual fund. The difference is the MF expenses are absorbed by the fund share price, while the ADR fees are debited off my account, just like they deposit a dividend but in reverse.

Some examples: for TSM (Taiwan Semiconductor), I was charged $6.81/100 shares last year. For Unilever, $2/year/100 shares, etc...

They also withhold foreign income taxes when depositing your dividends. Foreign government income taxes of course could be high, although you can get some deductions or even tax credits on US taxes to compensate.