Tuesday, June 1, 2010

Response To Question About Heineken ADRs

When an investor starts to compare the American Depository Receipt (ADR) price to the price of a foreign companies shares on its local exchange, you need to keep in mind that the ADR may represent some fraction of a share in the foreign company, or a single share, or even multiple shares of the stock. Many ADR shares will equal one share (1 to 1) of the foreign company shares.

The question had to do with the pricing of Heineken shares on the pink sheet exchange and in Europe. The Heineken unsponsored ADR with the symbol HINKY equals .5 of the Heineken ordinary shares. This information is shown on the quote page of the pink sheet exchange. So, to own the equivalent of 1 ordinary Heineken share, I would have to buy two shares of HINKY.

As I am writing this post, the last trade on HINKY was $21.52. If I bought 2 shares, the cost without commission would be $43.04. Then to compare the price to the 1 Heineken share trading in Europe, I would have to convert that sum into EUROs and the rough conversion amount would be about €35 at the current exchange rate. This was where Heineken closed on the the Amsterdam and Frankfurt exchanges. HEIA.AS: Summary for HEINEKEN HNK1.F: Summary for HEINEKEN

I would go further than this comparison and attempt to determine the percentage impact on the ADR price due solely to the weakness in the EURO and the amount of the percentage correction, if any, of the stock in its local currency.

Financial information is best acquired from Heineken's web site: Heineken International Heineken International I did find its last annual report that was copied and filed with the SEC: www.sec.gov The net profit in 2009 was shown in that report at €1,018 million. More information about the company is available at the Reuters profile page. I do not have a position.

Added 6/5/2010: More on the Heineken share classes can be found in the comments to this post and a subsequent post from me at Item # 2 Heineken Share Classes


  1. In the case of Heineken you also need to know if the ADR is based on the Heineken shares or the Heineken Holding shares (which owns ~50% of Heineken). Economically they represent the same, every Heineken Holding share represents one Heineken share and receives the same dividend.

    The Holding shares trade at a (some times fairly big) discount. It's a vehicle for the Heineken family to control the entire company without owning half the company (they are shareholders in a holding that owns 50% of Heineken Holding which owns 50% of Heineken, making their voting power in Heineken 50% with less than 25% of the economical interest).

  2. Thanks for the information. The ADR HINKY is for the ordinary shares with the symbol HEIA in your home market in the Netherlands, which closed today at €35.76. Two HINKY shares equals one HEIA. There is another ADR traded in the U.S. for the Heineken Holding shares which I see closed today at €31.2. Unfortunately, the ADRs for Heineken Holding trade on the "Grey Market" in the U.S., which has no transparency, and virtually no volume. There are no market makers and the bid/ask is not displayed. That symbol is HKHHF, which last traded a few shares on May 27th at $36.05.

    I suspect that is a one to one conversion. I see that Heineken Holding closed in Amsterdam at €29.35 on 5/27/2010. The USD 36.05 would have converted to around €29.17 on 5/27.