Depositary receipt
Okay, imagine you have a toy car that your friend really wants to play with, but your friend lives far away and can't come get the toy car from you. So, you decide to make a copy of the toy car and give that copy to your friend. This copy is a depositary receipt!
A depositary receipt is kind of like a copy of a financial asset (like a stock or bond) that's made for people who can't easily buy the asset themselves. Instead of physically buying a piece of that asset, someone can buy a depositary receipt that represents a share of it.
The company who issues the depositary receipt is like your friend who made a copy of your toy car. They take the financial asset (let's say it's a stock from a company) and create a bunch of copies (the depositary receipts) that people can buy and trade. Each depositary receipt represents a certain amount of the company's stock.
So, just like how your friend can play with the copy of your toy car and enjoy it without having to physically have the original toy car, the person who buys the depositary receipt can enjoy the benefits of owning a share of that asset (like getting a portion of the profits if the stock price goes up) without having to physically own the actual stock.
Does that make sense, kiddo?
A depositary receipt is kind of like a copy of a financial asset (like a stock or bond) that's made for people who can't easily buy the asset themselves. Instead of physically buying a piece of that asset, someone can buy a depositary receipt that represents a share of it.
The company who issues the depositary receipt is like your friend who made a copy of your toy car. They take the financial asset (let's say it's a stock from a company) and create a bunch of copies (the depositary receipts) that people can buy and trade. Each depositary receipt represents a certain amount of the company's stock.
So, just like how your friend can play with the copy of your toy car and enjoy it without having to physically have the original toy car, the person who buys the depositary receipt can enjoy the benefits of owning a share of that asset (like getting a portion of the profits if the stock price goes up) without having to physically own the actual stock.
Does that make sense, kiddo?