Are ADRs Going Away?

WSJ Article By Daniel Epstein.

I received an email from a reader asking me what I thought about this article and what it would mean for the future ADRs. The gist of the article is that because of the cost of Sarbanes/Oxley a lot of foreign companies want to delist from the NYSE.

I saw an interview with John Thain where he said no one had de-listed and he didn't think it would be a big issue. This article seems to refute some of Mr. Thain's comments.

The article mentions four stocks, only two of which I have heard of. Of the two I have heard of I only knew that one had ADRs. The point being that, as someone who devotes a lot of time to foreign investing, I don't think the issue is a big as Mr. Epstein perceives it to be.

I also think that the prestige of being able to list on the NYSE is important to many foreign companies. I remember years ago Nestle did not care about an NYSE listing and said so.

Lets assume I am very wrong about this and the number of ADRs cuts in half, or more. That would not change the demand for US dollars to find there way into foreign equities. What I think would happen is that trading in ordinary shares, although more difficult to do, would increase dramatically. We would also see interest in any type of product that gives exposure to foreign markets also increase. Big changes creates opportunities for the brokerage industry to shake the money tree. Just a little bit ingenuity would create a solution to this potential problem. It is even possible that we end up with something better than ADRs as we know them now.

To be clear I don't expect this to turn into a real issue.