A structure appears between owner and business
For an ordinary share, rights are connected with participation in the company.[1](#source-market-shares) A receipt adds a depositary agreement and organisations that hold the underlying securities and transmit the rights provided for by the programme. The SEC describes ADR creation through delivery of underlying shares to a depositary bank or its custodian.[10](#source-market-receipts) Distinguish the issuer of the underlying shares, the depositary bank, the account intermediary and the receipt holder. Their duties are not identical. A company’s fame does not fully answer how payments and rights work at another level of the chain.
The programme ratio determines how many underlying shares correspond to one receipt. Without it, price comparison loses meaning.[10](#source-market-receipts) A receipt with a higher cash price need not represent a more valuable business: it may correspond to more underlying shares. The reverse is possible when it represents a fraction. Before comparing, normalize to the same number of underlying shares and the same currency. The example below uses a fictional programme only; its ratio, price and exchange rate do not concern a real instrument.
An educational price-link calculation
Suppose one receipt represents two underlying shares. Each share costs 400 fictional units of local currency, and the exchange rate is 80 local units per one unit of the receipt currency. A simple reference value is 2 × 400 / 80 = 10 receipt-currency units. This compares equal rights; it is not a current-price promise or a ready trading opportunity. Costs, conversion restrictions and different observation times can break the simple equality between displayed prices.
A receipt quoted in another currency does not remove currency effects. With the local share price unchanged, conversion into the receipt currency depends on the exchange rate. The business itself may also have foreign-currency revenue, costs and debt. Separate the exchange-rate effect in the comparison arithmetic from currencies affecting the company’s operations. A familiar display currency changes the unit of quotation, not the sources of economic risk.
Dividends and fees must be separated
The SEC notes that depositary banks may charge servicing and transaction fees, and that some fees may be withheld from dividend payments.[10](#source-market-receipts) Suppose each of two underlying shares receives 20 local-currency units. At an assumed rate of 80, the gross equivalent per receipt is 0.50 payment-currency units. With a fictional 0.10 fee, 0.40 remains before taxes and other costs. This is an independent educational example, not a programme tariff.
A missing dividend does not necessarily remove a servicing fee: ADR descriptions also address fees passed through the chain when there are no periodic dividends.[10](#source-market-receipts) Read the programme’s tariff and contract independently of expected income. A company dividend announcement also does not determine the holder’s final amount; ratio, conversion method, withholdings, dates and intermediaries matter. The example does not establish any individual tax obligation. Tax treatment and crediting of withheld amounts must be checked under applicable rules.
Rights, conversion and exit
The depositary agreement defines services and the process for transmitting information, payments and other rights. The SEC distinguishes sponsored programmes, in which the company participates in the agreement, from unsponsored structures.[10](#source-market-receipts) The label alone does not establish which actions are available to a holder. Conversion into underlying shares, its cost and programme termination procedures require separate checking. A price difference does not prove a risk-free opportunity when movement between forms is operationally limited.
Risks are distributed across several levels
Business risk and changes in the value of the underlying shares remain. Additional factors include currency, the depositary agreement, fees, the account chain and legal procedures. This material does not assert that any current restriction exists or does not exist. A proper receipt record distinguishes the underlying security, the receipt, ratio, currencies, rights and programme documents. Knowing only the company name leaves the structure incomplete.
ADR level, sponsor and capital raising are different features
Deutsche Bank’s depositary-bank classification describes a sponsored programme as involving the underlying-share issuer and a chosen depositary bank, while an unsponsored programme is initiated by the bank without that contractual issuer participation.[6](#source-mk-db-adr-types) This describes programme organisation, not business reliability. A trading listing is not consent by the company to every receipt-related action.
The educational U.S. level scheme associates Level I with over-the-counter trading of existing shares through receipts, Level II with exchange trading without new capital, and Level III with a public receipt offering to raise capital.[6](#source-mk-db-adr-types) Registration forms, listing criteria and current reporting requirements are not reproduced here. A real issue requires its documents and current legal review. A level number does not establish purchase access, conversion rights or restrictions for a holder.
Company A may arrange receipts on existing shares, while Company B may raise money through a new public offering. In the first scheme, an investor’s sale to another investor does not itself finance the company; in the second, offering proceeds may go to the issuer. Thus not every increase in trading activity is capital raising. These are synthetic examples, not current programmes.
GDR and ADR identify programme and placement-market structures, but do not create one worldwide Level I–III ladder. Record independently the programme market, issuer participation, existing-share circulation or capital-raising issue, ratio and depositary agreement. A receipt is also not a substitute for a spot-market share, bond or fund unit.
What is acquired in the spot market
For this educational comparison, a spot transaction means agreeing to buy or sell the instrument with the prescribed settlement; it does not necessarily mean that money and rights move in the same second. A share represents company participation, a bond represents the debt claim specified by its issue, a fund unit represents participation in collective-portfolio results, and a receipt links to underlying shares through a separate depositary programme. In an exchange-traded fund, secondary purchase differs from creation of new units by an authorised participant, as State Street explains.[21](#source-mk-ssga-etf) ADRs add the contractual depositary structure described by the depositary bank.[6](#source-mk-db-adr-types)
Buying 10 receipts at 12 gives a trade price of 120 before costs. With a ratio of two, the economic base is 20 shares, but the buyer’s account records 10 receipts, not 20 directly purchased shares. Likewise, a fund-unit buyer does not receive a separate ownership line for every basket security. Check identifier, rights, cash flows and recordkeeping route; “spot” and “unleveraged” do not answer those questions. A derivative on a share price or index has a different structure and must not silently replace the security itself.