What are depositary receipts?

Most of the stocks Bitpanda Stocks replicates are “regular” stocks. However, some are actually depositary receipts, i.e. certificates representing stocks. This is usually the case for stocks that would be otherwise difficult or impossible to trade in Europe or USA.

In order to create depository receipts, a depository bank buys a specific amount of shares from a company before issuing depositary receipts on the local stock exchange, representing the stocks the bank bought previously. The stocks are held by the depository bank, while the investors, having purchased the depository receipts, are the actual owners.

One example is Alibaba, whose stock is available solely on the Hong Kong Stock Exchange. In order to make Alibaba stock tradable elsewhere, a depository bank in New York purchased Alibaba stock and made depository receipts available on the local exchange. That way, they enabled investors from the US and Europe to invest in Alibaba.

In the PRIIPs document, it is made clear whether a security is a “regular” stock or a depository receipt. Most of the stocks you encounter will, however, be stocks rather than depositary receipts. You can find a more detailed description in the prospectus.

Keep in mind

Bitpanda Stocks enables you to make fractional investments. To allow for this, Bitpanda issues a derivative contract which is backed by the underlying stock or ETF. You can read more about this here.