ADRs for Canadian Public Companies: A Potential Alternative to a Share Consolidation

American Depositary Receipts are not a new financial innovation. They have been connecting international companies with U.S. investors for almost a century.

Sony has used them. BP uses them. Adidas uses them.

What is new is that Canadian foreign private issuers can now use ADRs as a Nasdaq listing structure.

That distinction matters.

For years, a Canadian public company looking at a U.S. exchange listing could quickly find itself discussing a share consolidation — what Americans generally call a reverse split. If the Canadian shares were trading at C$0.50, C$1.00 or C$2.00, consolidating the underlying common shares was one way to create the higher nominal trading price required for the U.S. market.

Ten shares become one. Twenty become one.

The share price adjusts, but so does the company’s underlying share count.

An American Depositary Receipt program creates another possibility.

Instead of changing the Canadian common shares solely to create a higher-priced U.S. trading security, an issuer may be able to leave those shares intact and establish an American Depositary Share representing several of them.

Ten Canadian common shares could, for example, be represented by one U.S.-traded ADS.

The underlying Canadian shares still exist. They have not been consolidated ten-for-one.

What has changed is the U.S. trading unit.

The U.S. Securities and Exchange Commission expressly recognizes that the ratio between American Depositary Shares and the underlying foreign shares can be established so that the ADS trades at a price more typical for U.S. markets. Source: U.S. Securities and Exchange Commission.

That is what makes the structure particularly interesting for Canadian public companies today.

ADRs Were Created to Give U.S. Investors Access to Foreign Companies

The first American Depositary Receipt dates back to 1927.

J.P. Morgan’s predecessor, Guaranty Trust Company, created the first ADR for British retailer Selfridges Provincial Stores. It began trading on the New York Curb Exchange, the predecessor to the American Stock Exchange, on April 29, 1927.

The concept addressed a very practical problem.

Buying an international stock from the United States was considerably more cumbersome than buying a domestic security. An American investor had to deal with a foreign exchange, foreign currency, overseas custody and a different settlement system.

The ADR created a bridge.

A U.S. depositary bank could hold the foreign company’s shares through a custodian and issue a U.S. security representing an interest in those shares.

The investor could then buy a U.S.-dollar security through the American market rather than having to transact directly in the company’s home market.

Almost 100 years later, the basic purpose has not changed.

The SEC describes ADR programs as a mechanism through which foreign companies can establish a U.S. securities-market presence or raise capital. ADRs trade in U.S. dollars and clear through U.S. settlement systems, while the underlying foreign shares remain deposited through the custody arrangement. Source: U.S. Securities and Exchange Commission.

The technology has changed.

The markets have changed.

The objective has not: make international companies easier for U.S. investors to own.

Large International Companies Have Used ADRs for Decades

ADRs eventually became much more than a solution to an administrative problem.

They became part of the capital-markets strategies of some of the world’s largest international companies.

Sony: An Early Japanese ADR Pioneer

Sony provides one of the clearest examples.

In June 1961, Sony became the first Japanese corporation to issue ADRs. Its depositary securities traded over the counter in the United States before Sony became the first Japanese company to have its securities listed on the New York Stock Exchange in September 1970. Sony said at the time that the international listings were expected to broaden ownership and increase international recognition. Source: Sony.

That history is important.

ADRs were not created as an obscure structure for small issuers trying to solve a technical listing problem.

They became an established mechanism through which major international companies could connect their home-market equity with U.S. investors.

Adidas: Level I Access Without a U.S. Exchange Listing

Adidas illustrates a different use of the structure.

Adidas ordinary shares trade in Germany. U.S. investors can purchase Adidas ADRs under the symbol ADDYY on OTCQX.

The program is a sponsored Level I ADR program administered by Deutsche Bank Trust Company Americas. Source: Adidas.

Its ratio is particularly useful for understanding how flexible ADRs can be:

2 Adidas ADRs = 1 Adidas ordinary share

Each ADR therefore represents one-half of an underlying Adidas ordinary share.

That may initially seem like the opposite of what a Canadian company trying to create a higher U.S. trading price would want.

That is exactly the point.

An ADR ratio can work in either direction.

One ADS can represent several underlying shares. It can represent one underlying share. Or it can represent a fraction of one.

The ratio is part of how the U.S. trading unit is structured.

BP: Multiple Ordinary Shares Behind One U.S. Security

BP demonstrates the other side of the equation.

BP’s ordinary shares trade primarily in the United Kingdom, while its ADSs trade in the United States.

Each BP ADS represents:

6 BP ordinary shares

The six underlying British shares continue to exist. BP has not consolidated six British shares into one simply because its U.S. ADS represents six of them. Source: BP.

That distinction goes directly to the opportunity now available to Canadian issuers.

ADR or ADS? There Is a Difference

Before going further, it is important to clarify the terminology, because the structure involves two closely related but distinct concepts.

An American Depositary Receipt (ADR) refers broadly to the depositary program and legal framework used to represent ownership of foreign shares.

An American Depositary Share (ADS) is the U.S.-traded depositary security that investors buy and sell under that program.

In simple terms:

• The ADR program is the structure.
• The ADS is the security that trades in the market.

The SEC acknowledges that market participants often use ADR and ADS interchangeably in everyday discussion. Source: U.S. Securities and Exchange Commission.

For clarity, this article uses ADR program when discussing the overall structure and ADS when discussing the U.S.-traded security and its share ratio.

This distinction becomes especially important when discussing valuation and structure because it is the ADS ratio that determines how many Canadian common shares each U.S. trading unit represents.

The SEC specifically notes that an ADS can represent a specified number — or a fraction — of the underlying foreign shares. It also explains that the ratio can allow ADSs to be priced at levels more typical for U.S. markets.

For Canadian issuers considering Nasdaq, that distinction is critical.

Why the ADS Ratio Matters

Consider a simplified Canadian example.

A company has:

100 million Canadian common shares outstanding

Those shares trade at:

C$0.75

If the company undertakes a 10-for-1 consolidation, the result would be approximately:

10 million Canadian common shares outstanding

The theoretical share price adjusts proportionately, assuming everything else remains equal.

But the underlying Canadian capitalization has changed.

Now consider the ADS alternative.

The company retains its:

100 million Canadian common shares

and establishes a ratio of:

1 ADS = 10 Canadian common shares

Those 100 million Canadian common shares have not suddenly become 10 million shares.

The U.S. investor is instead trading a security representing ten of them.

This is not financial engineering that creates additional economic value. Ten shares worth C$0.75 each do not suddenly become more valuable because they are packaged together.

But the trading unit is different.

And sometimes the trading unit is precisely the issue that needs to be addressed.

An ADS Ratio Is Not a Reverse Split

This is the central distinction.

With a 10-for-1 Canadian share consolidation:

10 Canadian common shares become 1 Canadian common share.

With an ADS ratio of 10-to-1:

10 Canadian common shares continue to exist and are represented by 1 U.S. ADS.

Those are not the same transaction.

Under a typical depositary arrangement, ADR holders can surrender their depositary securities for the representative number of underlying shares. Holders of the underlying shares can also deposit those shares in exchange for ADRs, subject to the deposit agreement. Source: U.S. Securities and Exchange Commission.

That mechanism helps maintain the economic connection between the Canadian share price and the U.S. ADS price, adjusted for the ADS ratio and CAD/U.S. dollar exchange rate.

The important point is narrower.

An appropriately structured ADS ratio may eliminate the need for a Canadian share consolidation undertaken solely to create a higher-priced U.S. trading security.

It does not mean a consolidation will never be appropriate.

It means a consolidation should no longer automatically be assumed to be the only solution.

Why Canada Was Historically Different

If international companies have been using ADRs for almost a century, why have Canadian companies not routinely used them on Nasdaq?

Canada occupied a somewhat unusual position.

Canadian issuers already had unusually close access to U.S. capital markets through the Multijurisdictional Disclosure System, or MJDS.

MJDS allows qualifying Canadian companies to use Canadian disclosure documents for specified U.S. registration and reporting purposes.

Historically, Canadian companies therefore tended to list their Canadian common shares directly in the United States rather than establishing Nasdaq ADR programs.

Nasdaq’s rules reflected that history.

Until late 2025, Nasdaq Rule 5215 permitted ADRs representing foreign companies but expressly excluded Canadian issuers. Nasdaq explained that this exclusion reflected historic Canadian issuer preferences and the availability of MJDS. Source: SEC / Nasdaq Rule Filing.

That changed in December 2025.

Nasdaq filed an amendment to Rule 5215 removing the words “non-Canadian” from the rule, allowing Canadian foreign private issuers to use ADRs on Nasdaq in the same manner as other eligible foreign private issuers. Source: U.S. Securities and Exchange Commission.

That is what is new.

Not ADRs.

Not Canadian access to U.S. markets.

What is new is the availability of the Nasdaq ADR structure to Canadian issuers.

The Foreign Private Issuer Qualification Matters

There is an important qualification.

Being incorporated in Canada does not automatically make a company a foreign private issuer, or FPI, for U.S. securities-law purposes.

The SEC notes that foreign private issuer status is not determined solely by where a company is incorporated. The analysis also considers U.S. share ownership and the company’s level of business connections with the United States. Source: U.S. Securities and Exchange Commission.

That matters because the ADR framework discussed here is most directly relevant to Canadian companies that qualify as foreign private issuers.

For many Canadian public companies that will be the case.

But it is a threshold issue, not something that should simply be assumed.

The Three Levels of ADR Programs

ADR programs are generally described as Level I, Level II and Level III.

Those levels are not simply different versions of the same program.

They represent very different degrees of access to the U.S. securities market.

Level I ADR: U.S. OTC Market Access

A Level I ADR program creates a U.S. trading presence without listing the security on a national securities exchange such as Nasdaq or the NYSE.

The securities trade over the counter.

A Level I program cannot be used by the issuer to conduct a registered U.S. public capital raise.

It is also the only ADR level that may be unsponsored. Source: U.S. Securities and Exchange Commission.

Sponsored Level I ADR

In a sponsored ADR program, the foreign issuer participates directly.

The company enters into an arrangement with the depositary bank, which can maintain the ADR register, issue and cancel ADSs, distribute dividends, transmit shareholder materials and facilitate the voting process under the deposit agreement.

Adidas provides a good example of a major international company using Level I to provide U.S. investors with access to its equity without maintaining a Nasdaq or NYSE listing.

Unsponsored Level I ADR

An unsponsored ADR is fundamentally different.

The issuer does not establish the program itself.

The SEC notes that an unsponsored facility can be created without the cooperation of the foreign company, including by a market participant seeking to establish a trading market.

For a Canadian public company deliberately pursuing a U.S. capital-markets strategy, the sponsored structure is therefore generally the more relevant comparison.

First Phosphate: A Canadian Level I Precedent

The Canadian market now has a real example.

In February 2026, First Phosphate Corp. launched what it described as the first Canadian company-sponsored Level I ADR program to trade on OTC Markets.

The ADR traded on OTCQX under FPHOY.

Its ratio was:

10 First Phosphate common shares = 1 ADR

BNY was appointed depositary bank.

That was interesting.

What happened next was considerably more important.

Level II ADR: Nasdaq or NYSE Without a Public Financing

A Level II ADR program moves the depositary security onto a U.S. national securities exchange.

That could be Nasdaq or the NYSE, assuming the applicable exchange requirements are satisfied.

Level II is therefore a real U.S. exchange listing.

It should not be thought of as an alternative to a “full” U.S. listing.

It is a U.S. exchange listing.

The distinction is the security being listed.

Instead of directly listing the Canadian common shares, the issuer lists its ADSs.

Level II does not, however, include a registered U.S. public capital raise.

The SEC describes a Level II program as creating a national-exchange trading presence without being used to raise capital. Source: U.S. Securities and Exchange Commission.

This allows two decisions that are often discussed together to be separated:

Do we want a U.S. exchange listing?

and

Do we want to raise U.S. capital now?

They do not necessarily have to happen at the same time.

First Phosphate Moves From Level I to Nasdaq Level II

First Phosphate now provides the clearest Canadian example of why this matters.

Its ADRs began trading on the Nasdaq Global Market on August 10, 2026, following the conversion of its Level I ADR program into a Level II program.

The ticker became PHOS.

The ratio remained:

10 First Phosphate common shares = 1 ADR

Its existing Canadian and other common-share listings remained in place. The company also stated that the Nasdaq uplisting involved no new securities offering, no issuance of additional common shares and no capital raise.

That is the central precedent in this discussion.

First Phosphate obtained a Nasdaq-listed U.S. trading security with a 10-to-1 relationship to its Canadian common shares without completing a corresponding 10-for-1 consolidation of those Canadian common shares.

This is no longer theoretical.

Form F-6: The ADR Registration Piece

There is another part of the structure that deserves attention.

The SEC states that ADSs are registered on Form F-6.

Form F-6 covers the depositary arrangement and the contractual terms governing the depositary securities. It includes items such as the deposit agreement and the form of ADR certificate. It does not serve as the issuer’s general corporate disclosure document. Source: U.S. Securities and Exchange Commission.

That distinction helps explain how the ADR levels work.

For a Level I program, Form F-6 may be the principal SEC registration filing for the depositary securities where the underlying issuer qualifies for the applicable Exchange Act exemption.

For Level II, Form F-6 is used for the depositary securities, while the underlying class must also be registered for U.S. exchange trading.

For Level III, Form F-6 remains part of the structure, but a separate registration statement is also required for the securities offering.

For qualifying Canadian issuers, MJDS can affect which additional forms are available.

Level III ADR: Exchange Listing Plus a U.S. Financing

A Level III ADR program combines the exchange-listed U.S. security with a registered U.S. capital raise.

The distinction is relatively simple:

Level II = U.S. exchange listing without a registered public financing.

Level III = U.S. exchange listing plus a registered public financing.

The SEC describes Level III programs as allowing the foreign company both to establish a U.S. securities-market presence and to raise capital. Source: U.S. Securities and Exchange Commission.

This is where MJDS can become particularly relevant for an eligible Canadian issuer.

MJDS Helps — But Eligibility Is Not Automatic

MJDS can reduce some of the regulatory friction for qualifying Canadian companies entering the U.S. market.

But Canadian incorporation alone is not enough.

For example, the SEC’s eligibility provisions for Form F-10 generally include requirements concerning Canadian organization, foreign private issuer status, Canadian reporting history and a minimum public-float threshold, subject to the particular provisions and exceptions of the form. Source: U.S. Securities and Exchange Commission.

That is an important limitation, particularly for smaller Canadian issuers.

MJDS can be a significant advantage.

It should not be treated as automatic.

Nicola Mining: The Financing Side of the ADS Structure

Nicola Mining Inc. provides a recent Canadian example of using ADSs in connection with a U.S. financing.

In April 2026, Nicola completed an underwritten U.S. public offering initially consisting of 930,233 ADSs and accompanying warrants at US$6.45 per ADS and accompanying warrant.

Each ADS represented:

12 Nicola Mining common shares

The initial closing generated gross proceeds of approximately US$6 million.

Nicola subsequently issued another 139,534 ADSs through the exercise of the underwriters’ over-allotment option, increasing aggregate gross proceeds to approximately US$6.9 million. Source: Nicola Mining SEC Filing.

The ADSs trade on the Nasdaq Capital Market under NICM, and the offering was conducted pursuant to an effective Form F-10 registration statement.

Nicola should not be presented as an example of an ADR eliminating the need for a consolidation. The company had previously consolidated its Canadian common shares.

Its relevance is different.

Nicola demonstrates the financing side of an exchange-listed ADS structure.

First Phosphate demonstrates the Level II Nasdaq listing without a concurrent financing.

Together, they show two different applications of depositary securities by Canadian public companies.

The ADS Ratio Cannot Be Considered in Isolation

The flexibility of an ADS ratio is important.

It is not unlimited.

Nasdaq’s initial listing requirements still apply.

In the case of ADRs, Nasdaq’s initial listing standards also require at least 400,000 ADRs to be issued, together with the other applicable requirements concerning price, public float, shareholder distribution, market value and financial qualification. Source: Nasdaq Listing Rules.

That 400,000 requirement matters.

A company cannot simply select an arbitrarily large ADS ratio to create whatever U.S. trading price it wants.

The ratio has to work within the broader listing structure.

That is why an ADR is an alternative structure, not a loophole.

ADRs Do Not Get Around Nasdaq’s Listing Standards

An ADS ratio can change the U.S. trading unit.

It cannot transform the underlying company.

Nasdaq still evaluates the issuer against its applicable listing requirements.

An ADR cannot manufacture:

• market capitalization;
• public float;
• shareholder distribution;
• operating history;
• revenue;
• assets;
• stockholders’ equity; or
• genuine liquidity.

Those fundamentals still have to exist.

What the ADS ratio can potentially address is something much narrower:

the nominal price and size of the U.S. trading unit without requiring the Canadian issuer to change its underlying Canadian share count solely for that purpose.

That is a narrower benefit.

For the right Canadian company, it could still be a very important one.

ADRs Do Not Eliminate U.S. Reporting

The same caution applies to regulatory reporting.

A Level II or Level III ADR program does not allow a Canadian public company to obtain a Nasdaq listing while remaining outside the U.S. securities regulatory system.

Level II requires the underlying class to be registered for national-exchange trading.

Level III adds registration of the securities being offered to investors.

Form F-6 registers the depositary securities, but it does not replace the issuer’s broader disclosure obligations.

Eligible Canadian issuers may be able to use MJDS and forms such as Form 40-F and Form F-10.

That can simplify parts of the cross-border regulatory framework.

It does not eliminate it.

The ADR changes the form of the security through which the company reaches the U.S. market.

It does not remove the obligations associated with being there.

The Depositary Bank Is an Important Part of the Structure

The depositary bank should not be treated as an administrative footnote.

It sits between the underlying shares and the U.S. ADSs.

Among other things, the depositary can maintain the ADR register, issue and cancel depositary securities, process distributions and dividends, transmit shareholder information and facilitate voting under the deposit agreement.

Adidas, for example, uses Deutsche Bank Trust Company Americas as depositary for ADDYY. Source: Adidas.

First Phosphate uses BNY for its ADR program.

That infrastructure is what connects the U.S. security with the underlying Canadian shares.

The ADR is not simply another ticker symbol.

It is a bridge between two markets.

Level I, Level II and Level III at a Glance

The progression is straightforward.

Level I creates a U.S. OTC trading presence.

Level II creates a U.S. national-exchange listing without simultaneously conducting a registered public capital raise.

Level III combines the U.S. exchange listing with a registered financing.

The structure chosen depends on what the company is actually trying to accomplish.

U.S. investor access is one objective.

A Nasdaq or NYSE listing is another.

Raising U.S. capital is another again.

They should not automatically be treated as the same decision.

Pros and Cons of ADRs for Canadian Public Companies

The advantages can be meaningful.

So can the trade-offs.

Conclusion: Another Option, Not a Shortcut

There is no reason to expect ADRs to replace direct U.S. listings of Canadian common shares.

Nor should every Canadian company considering Nasdaq conclude that it no longer needs a share consolidation.

Some companies will still have valid reasons to change their capitalization. Some may not qualify as foreign private issuers. Some will not meet the requirements to use MJDS. Others may fail to satisfy Nasdaq’s public-float, shareholder-distribution, financial or liquidity requirements regardless of how their ADS ratio is structured.

That is not the point.

The point is that Canadian public companies now have another option to consider before automatically changing their underlying share structure simply to create a higher-priced U.S. security.

For almost a century, international companies have used ADRs to create a bridge between their home-market shares and U.S. investors.

Sony did it.

BP does it.

Adidas does it.

The basic mechanism is established. What has changed is its availability to Canadian issuers on Nasdaq.

First Phosphate is particularly important because it demonstrates the structure in practice. Ten Canadian common shares are represented by one Nasdaq-traded depositary security. The company’s underlying Canadian common shares remained listed, there was no corresponding ten-for-one consolidation and no capital was raised as part of the Level II Nasdaq uplisting.

Nicola Mining demonstrates another side of the market. Its Nasdaq-listed ADSs each represent 12 Canadian common shares, and those ADSs were used in a registered U.S. financing that ultimately raised approximately US$6.9 million.

Those are two different transactions serving two different objectives.

And that is probably the broader lesson.

A U.S. listing should not begin with the assumption that there is only one structure.

For a Canadian company considering Nasdaq, the discussion may include a direct listing of the Canadian common shares, an ADR structure, a concurrent financing or some combination depending on the company’s circumstances.

An ADR does not make Nasdaq’s requirements disappear.

It does not eliminate SEC reporting.

It does not manufacture liquidity or market capitalization.

And it does not make an issuer Nasdaq-ready simply by changing the number of underlying shares represented by each U.S. security.

What it can do is solve a specific structural problem.

A company with 100 million Canadian common shares does not necessarily have to turn them into 10 million Canadian common shares simply because the U.S. market requires or prefers a higher-priced trading unit.

It may be possible to leave those 100 million shares in place and create an ADS representing five, ten or another appropriate number of them — provided the issuer and the resulting ADR structure satisfy the applicable U.S. requirements.

That changes the starting question.

For years, the conversation for many Canadian companies looking south of the border was:

What consolidation ratio will be required for the U.S. listing?

There is now another question worth asking first:

Does the underlying Canadian share structure need to be changed at all?

For Canadian public companies considering U.S. market access, that is a significant development.

For more insight on ADR structures, Nasdaq listings and U.S. market alternatives for Canadian public companies, contact us.