Why does the same company listed on two different stock exchanges trade so differently?



For example: Toyota (NYSE:TM) trades at twice the price of the Nikkei (7203.T): $153USD vs Y8065. And I’ve seen this with other foreign listings where it’s not because of currency exchange fluctuations. Toyota just happened to be the most insane difference I’ve seen.

In: Economics

Technically they’re different shares. The US one is called an American Depository Receipt (ADR). It’s a cheaper way for non-US companies to get access to US investors without having to go through all the steps and expense of listing on one of the US indices. There would be a different number of issued shares for each. For example 1 share of the Japanese listing might equal 4 ADRs etc. That’s why there’s such a difference.

Slightly more advanced topic: Some people will try to trade an arbitrage between the two listings after adjusting for currency moves.