John Murray
A good habit with any foreign stock is to look up what is happening in its home country, not just the company itself. Asking your broker about fees before you buy is a simple step that pays off.
What is an ADR, and why did Brazilian stocks trading in New York drop so sharply on
Discussion
Monday?
An ADR, or American Depositary Receipt, is how most foreign companies' stocks trade on U.S. markets. A U.S. depositary bank holds the company's real shares from its home market and issues receipts that trade in U.S. dollars. Each ADR can stand for one share, several shares or a fraction of a share, and its price follows the home-market stock, adjusted for that ratio.
Because the ADR trades in dollars, its price reflects two things at once: the stock back home and the exchange rate. That's why ADRs can react to big home-country news before the home market even opens. After Brazil's presidential runoff on Sunday, U.S.-listed Brazilian shares slumped in premarket trading on Monday. Reuters reported Petrobras down about 20% and Itaú Unibanco down 28.5%, as many investors had been positioned for a different result.
The beginner takeaway: owning an ADR means you're exposed to the company, its home country's politics and economy, and the currency, not just the business. The SEC suggests researching conditions in the company's home country and asking your broker what ADR fees apply, since they're usually charged per ADR. This is education, not advice. Questions about ADRs or foreign stocks? Drop them below. There are no silly questions here.
Sources: Reuters via Investing.com Brasil and UOL (Oct 26, 2026); Investing.com (Oct 26, 2026); Exame (Oct 26, 2026); SEC Investor Bulletin: American Depositary Receipts; Investor.gov ADR glossary.