1 · Two structures, one ticker box
When a foreign company wants US investors to be able to buy it, it has broadly two paths. The first: a US depositary bank buys and holds the company's shares in its home market, then issues American Depositary Receipts against them — each ADR represents one or more underlying shares, held in custody thousands of miles away. Equinor is a clean example: its ordinary shares are listed on the Oslo Stock Exchange, and its American Depositary Shares (ticker EQNR) trade on the NYSE representing those Oslo-held shares, per Equinor's own investor-relations disclosures and its SEC registration as a foreign private issuer.
The second path: the company itself lists its actual common shares directly on a US exchange, with no depositary bank standing in between. This is common among Marshall Islands and Bermuda-incorporated shipping companies, which register directly with the SEC and trade "common stock" — not depositary receipts — on the NYSE or NASDAQ. Dorian LPG (NYSE: LPG), a Marshall Islands VLGC operator, and DHT Holdings (NYSE: DHT), a Marshall Islands crude tanker owner, are both examples: their NYSE-listed shares are the company's actual equity, not a bank's receipt for equity held elsewhere.
2 · The custody fee — small, recurring, easy to miss
ADR custody — or "pass-through" — fees typically run $0.01 to $0.05 per ADR, charged by the depositary bank to cover the cost of holding the underlying shares, handling dividends, and SEC recordkeeping. The most common collection method: the fee is simply subtracted from the gross dividend before it reaches you, so the depositary announces both a gross and a net dividend rate. For ADRs that pay no dividend, the fee still gets collected — passed through to brokers, who pass it to holders.
It sounds trivial per share, and per-dividend it usually is. But it is a structural cost that a directly-listed common share simply does not have, because there is no custodian in the chain to pay. Over a multi-year holding period with regular dividends, it is a small, permanent drag that only ADR holders carry.
3 · The FX conversion you never see happen
A foreign company pays its dividend in its home currency. For an ADR, the depositary bank converts that payment into USD at the exchange rate prevailing on its chosen conversion date — a rate set by the bank, not one you shopped for. You still bear FX risk either way (a directly-listed USD share of a foreign company is still exposed to the underlying business's home-currency economics), but the ADR structure adds a specific, bank-controlled conversion event with its own spread, on top of that underlying exposure. A directly-listed, USD-denominated common share skips this extra conversion step entirely — the dividend is declared and paid in USD from the start.
4 · Voting rights — direct vs. through an intermediary
This is the least understood difference. Because the depositary bank is the legal holder of an ADR's underlying shares, most ADRs do not carry direct voting rights for the retail holder — instead, the depositary bank votes the underlying shares according to instructions ADR holders submit, where the deposit agreement provides for that mechanism at all. Practically: you may get a voting instruction form rather than a proxy, and the exact mechanics depend entirely on that specific company's deposit agreement — some are closer to full pass-through, some are much thinner.
A directly-listed common share carries the vote itself, with no intermediary step and no deposit-agreement dependency. For an activist-minded or governance-conscious investor, that is a real, structural difference — not a technicality.
5 · Real examples from Marco's sectors
| Company | Structure | Home market |
|---|---|---|
| Equinor | ADS (ADR) | Oslo Stock Exchange (primary) |
| Rio Tinto | ADR | London Stock Exchange (primary) |
| Dorian LPG | Direct common stock | NYSE (no separate home exchange) |
| DHT Holdings | Direct common stock | NYSE (no separate home exchange) |
My practical rule: I don't avoid ADRs — Rio Tinto's underlying business is worth owning regardless of the wrapper, and the custody fee is real but small. What I do is check the structure before I compare yields apples-to-apples: a directly-listed Marshall Islands shipping name and an ADR-wrapped European name can carry genuinely different cost layers on top of an identical headline dividend yield. I run the underlying fundamentals for both the same way, on InvestingPro, and let the structure be a second-order adjustment, not the reason to skip a good business. (*Affiliate link — no extra cost to you.)
Check every company individually. ADR vs. direct-listing status, custody fee schedules and deposit-agreement voting terms vary company by company and change over time — verify the current structure in the company's own investor-relations pages or SEC filings before assuming.
6 · FAQ
Do all foreign stocks on the NYSE trade as ADRs?
No. Many Marshall Islands and Bermuda-incorporated shipping companies list actual common shares directly, with no depositary bank in between. Others, like Equinor, trade as ADRs backed by shares held at a home-market listing.
What does an ADR custody fee cost?
Typically $0.01–$0.05 per ADR, usually deducted from the gross dividend, or billed separately if the ADR pays no dividend. Directly-listed common shares carry no such fee.
Do ADR holders get to vote at shareholder meetings?
Usually indirectly — the depositary bank holds the legal shares and votes per holder instructions, if the deposit agreement provides that mechanism. A directly-listed common share carries the vote itself.
Does an ADR's dividend get hit by currency conversion costs?
Yes — the depositary bank converts the local-currency dividend to USD at its chosen rate on its chosen date. A directly-listed, USD-denominated share skips this extra conversion step.