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How to Convert Russian ADRs/GDRs to Local Shares?

Conor Scott, CFA| Updated September 21st, 2022

[Update: Freedom24 acceptance of orders for conversion of ADRs and GDRs of Russian issuers ceased from 21.09.2022. More info here].

The major European clearinghouse and settlement agency Euroclear extended the deadline for converting Russian ADRs and GDRs (non-sanctioned) into equivalent local stocks to October 15, 2022. Please find detailed information.

This announcement gives holders the right to transfer their Russian ADRs, such as Gazprom ADRs or Lukoil ADRs, currently toxic assets, to local stocks that could be redeemable in the future. 

In this article, we’ll dive deep into how you can convert or transfer your Russian ADRs and GDRs using one of Europe’s leading brokers, Freedom Finance (acting through the Freedom24 online trading platform). 

The Issue With Russian ADRs

  • Following the war in Ukraine from February 24th onwards, the Russian government decided to remove all listings of firms registered in Russia from foreign exchanges. This translates into Russian ADRs (American Depositary Receipts) or GDRs (Global Depositary Receipts). 
  • The most common problem facing investors is how to convert/transfer their Russian ADRs into valid local stocks.
  • All non-sanctioned Russian ADRs or GDRs are viable for converting into local stocks through certain non-Russian client brokerage accounts until October 15th. Previously, Russian law generally required a Russian custodial (share) account to facilitate the conversion process. 

How to Exchange Your Russian ADRs and GDRs for Local Shares

Not all online, non-Russian brokerages enable the conversions of depositary receipts. Freedom Finance Europe, which owns Freedom24, is a leading European exchange facilitating this process. 

Using Freedom Finance Europe as an example, the procedure for converting looks like this: 

  1. Open an account, and include:
    • An identity card or passport 
    • Proof of address, such as a bank statement or utility bill 
    • A selfie (self-photo) 
    • A basic financial profile
    • Your tax ID (taxpayer identification number)
  2. Initiate the transfer of securities by emailing the list of securities plus ISINs (international securities identification codes) to the appropriate address; for example, info@freedomfinance.eu
    • Depending on the securities, provide an additional source of income information at the request of the broker
    • Follow the instructions provided by your broker to deposit the assets
  3. From the ongoing bank or broker which currently custodies your Russian ADRs or GDRs, submit an outgoing transfer order in favour of Freedom Finance
  4. Convert the newly received ADRs or GDRs to local Russian stocks following the broker’s instructions by the final deadline, October 15, 2022

To recap, there are four key points to note:

  1. Not all brokers can convert Russian ADRs or GDRs to local equivalents
  2. For those brokers which can require an outgoing transfer from your existing broker; instructions are provided per broker, but much is done through email (like above)
  3. The conversion process no longer requires a Russian broker or custodian
  4. The deadline for converting ADRs or GDRs, such as convert Gazprom ADR to ordinary shares, remains October 15, 2022

About Freedom24 – the Broker to Convert Your Russian ADRs and GDRs

# Freedom24

How to Convert Russian ADRs/GDRs to Local Shares? 1
Visit Freedom24

Freedom24 at a glance

Russian ADR/GDR Conversion Fee3% of the local share value, min: $50
ProductsStocks, ETFs, Bonds, Futures and Options, new shares at initial (IPO) price
Minimum Deposit€/$0
RegulatorsCySEC, BaFin and SEC

Founded in 2008, Freedom Finance (acting through the Freedom24 online trading platform) is a European broker known for its exclusive feature of IPO subscriptions. They let you trade newly listed US, EU, and Asian companies at IPO prices, in addition to thousands of trading instruments, including stocks, ETFs, bonds, futures, and options on major global exchanges.  They do not have a minimum deposit for general trading and have very low commissions on stock and ETF trading. On the downside, they charge a €7 fee per withdrawal.

Customers choose one of the various service plans on offer that fit their currency needs, trading styles, and investor goals. The plan selection tool, such as for “Smart,” seeks to balance options with trading costs and provide something for everyone.

After registration, customers benefit from the broker’s promotion of 0% commission in the first 30 days. Further, if any new customer transfers €20,000 or more in stocks from any other European broker, they receive €200 in free bonus points–which can directly offset future trading fees.

Another helpful tools for beginning (and experienced) traders are the InvestIdeas blog from award-winning Freedom Finance securities analysts, which includes actual recommendations and financial forecasts.

The conversion fee for converting Russian ADRs and GDRs (such as Gazprom) is 3% of the value of the local share equivalent at the close of the day on July 18, 2022, with a minimum fee of $50.

If you want to learn more, check our Freedom24 Review.

Russian ADRs That Can Be Converted To Regular Shares

Below are the major Russian ADRs that can be converted to regular shares with Freedom24 (you will find other companies in the FAQs section):

  • Gazprom ADR
  • Lukoil ADR
  • Aeroflot Russian Airline GDR

Convert Gazprom ADRs (OGZPY) to Gazprom Stock

Founded in 1989, Gazprom PJSC is an energy company focusing on geological exploration, production, transportation, storage, processing, and sales of gas and oil and the generation of heat and electric power. The company is a major supplier of gas to Europe, as well as to other international countries.

As announced last May, the Russian energy giant has decided to discontinue its ADR program. As we mentioned earlier, holders of Gazprom ADRs can convert them to ordinary shares or receive payment of sale proceeds if the Depositary sold your shares.

Convert Lukoil ADRs (US: LUKOY, UK:LKOD) to Lukoil Stock

Headquartered in Moscow, the PJSC Lukoil company is one of Russia’s world’s largest energy producers and the second-biggest oil company. It engages in extracting, producing, transporting, and selling petroleum, natural gas, and petroleum products. Lukoil announced that it will delist its depositary receipt from foreign exchanges in the United States and the United Kingdom to comply with Russian Federation laws.

Convert Aeroflot ADRs (AERZY) to Aeroflot Stock

Aeroflot is another Russian company that sent a notice to their depository bank to terminate the depository agreement. Founded in 1923, Aeroflot is the largest airline in Russia and one of the oldest active airlines in the world.

The Bottom Line

Freedom24 is currently the only major European brokerage to facilitate the conversion of Russian ADRs and GDRs. While we hope for a swift end to the war in Ukraine, we understand some investors historically held positions in major Russian firms, like Gazprom, Aeroflot, Norilsk Nicke, and RuaHydro (RSHYY).

Depositary receipt holders should decide if they need to convert their Russian ADRs to local shares, as Russian companies are obliged to delist their ADRs and stop offering depository programs on foreign exchanges.

The deadline to convert the toxic depositary receipt assets is October 15, 2022. Failing to convert beyond this point may make it difficult or impossible to redeem the value of your holdings. 

Lastly, it’s important to remember that investments in securities and other financial instruments always involve the risk of losing your capital.

Other FAQs

Who is eligible to request a conversion?

Anybody who could open an account with Freedom24 and send the necessary security details per Freedom24’s instructions.

What is the usual timeframe for the conversion process?

This generally depends upon the current workload of Freedom24 and how quickly you may send the relevant security details. A good rule of thumb for most security transfers is 2-3 weeks, but each account transfer is unique.

What is the deadline to convert Russian ADRs to ordinary shares?

The deadline to convert is October 15, 2022. Please try to start the conversion process in September.

Why is it important to convert Russian ADRs and GDRs?

Because if they are not converted, they expire, and you lose your capital. On the other hand, stocks belong to you in perpetuity.

Will I be able to sell the received stock immediately after converting?

No, the stock cannot be sold now as it is kept in Russia’s national depositary. You will be able to sell these stocks when the sanctions are removed from the national depositary.

How to request a conversion of Russian ADR and GDR if I live in the US? 🇺🇸

Since Freedom24 is not available in the US, we suggest that you contact your broker and check if they are able to proceed with the conversion request.

How to request a conversion of Russian ADR and GDR if I live in the UK? 🇬🇧

Since Freedom24 is not available in the UK, we suggest that you contact your broker and check if they are able to proceed with the conversion request.

What other Russian ADRs can be converted with Freedom24?

Here is the full list of Russian ADRs that can be converted to ordinary shares with Freedom24:

  • ENEL RUSSIA GDR
  • AEROFLOT GDR
  • MOSENERGO GDR and ADR
  • LSR GROUP PJSC GDR
  • JSC OGK-2 GDR
  • PIK GROUP GDR
  • MECHEL GDR and ADR
  • ACRON GDR
  • CHERKIZ GDR
  • GAZPROM ADR
  • SISTEMA GDR
  • MMC NORILSK ADR
  • MAGNIT GDR
  • MOBILE TELESYSTEMS ADR
  • NOVOLIPETSK STEEL GDR
  • LUKOIL ADR
  • ROSSETI GDR
  • POLYUS GDR and ADR
  • RUSHYDR ADR
  • SURGUTN ADR
  • SURGUTNEFTEG ADR
  • ROSNEFT OIL COMPANY GDR
  • EN+- GROUP DR
  • TATNEFT ADR
  • PHOSAGRO GDR
Conor Scott, CFA
Contributor

Conor is a CFA charterholder who has been active in the wealth management industry since 2012, continuously researching the latest developments affecting portfolio management and cryptocurrency.

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