Schweser says that Level III ADRs are the only ones that can raise capital, but Level II ADRs are also listed on an exchange. Thus, can’t Level II ADRs raise capital (isn’t that what they’re doing when they’re putting their shares on an exchange for sale)?
You ask some wild questions.
Level III ADR can be offered in an IPO, whereas Level II cannot. Both Level II and Level III ADR can be traded on an exchange.
Hey, it was a Schweser QBank question, therefore since I got it wrong and couldn’t find the answer, I turned to you. Also, can I cheat on you during the test? Cause that would help a lot, thanks.
But if Level 2 and Level 3 can both be on an exchange, don’t you need to declare an IPO for that? How can they be on the NASDAQ if they have not IPOd yet?
In a LIII there is an IPO and issuance of new securities I think in a LII ADR the company deposits their home country securities with an i-bank / BD and that ibank / bd makes a market in those securities…so the company is not really raising any additional $$'s / equity…just having existing shares trade in a new market however, in LI ADR they are just traded OTC
I know this isn’t directly related to the original question, but saw this in a qbank explanation and thought I’d post it here: Level I: This is the most basic type of ADR, used by foreign companies that either don’t qualify or don’t wish to have their ADR listed on an exchange. Level I ADRs trade solely on the OTC market and are an easy and inexpensive way for a company to gauge interest for its securities in North America. Level I company ADRs are not required to comply with SEC registration and reporting requirements. Level II: This type of ADR is listed on an exchange or quoted on any official U.S. stock exchange, including the NYSE and Nasdaq. Level II ADRs meet the registration requirements of the SEC but they also get higher visibility trading volume. Level III: These are the most prestigious of the three types, in which an issuer floats a public offering of ADRs on a U.S. exchange. Level III ADRs enable the issuer to raise capital and gain visibility in the U.S. financial markets.