Shares of Novo Nordisk (CPH:NOVO-B) halve as trading opens

Novo Nordisk (CPH: NOVO-B) (OTCPK: NONOF) (NYSE: NVO) shares are set to fall 50% at today’s open. This is not the beginning or even the result of a catastrophe, on the contrary, it is a symptom of success. The stock is simply becoming “too expensive,” so something needs to be done about it. What makes matters worse is that the Danish quotation is changing today. That’s the CPH quote there. The OTC listing is a trading of this Danish stock in New York organized by a broker. So that will change today too. However, the NYSE price NVO is the company’s own ADR. That won’t change until next week.

This is all a bit confusing, but that’s how they want to play it: “Novo Nordisk’s B shares are listed on Nasdaq Copenhagen in trading units of DKK 0.20, and its ADRs, which correspond to B shares of DKK 0.20, are listed on the New York Stock Exchange (NYSE). In order to ensure liquidity for both the Novo Nordisk B shares and the American Depositary Receipts (ADRs) and to align the price level, particularly for the ADRs, with market practice, the Board of Directors has decided to divide the trading units into two parts: a ratio. The trading unit of Novo Nordisk B shares listed on NASDAQ Copenhagen will be changed from DKK 0.20 to DKK 0.10 from September 13, 2023. The ADRs listed on the New York Stock Exchange (NYSE) will also be split starting September 20, 2023 to ensure that the ratio of B shares to ADRs remains at 1:1.”

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Novo Nordisk share price from Google Finance

One consequence of this is that the three quotes will differ from each other in the coming week. The ADR (i.e. NVO) will look twice as expensive as it should be compared to the other two offers.

That being said, this is a nice natural experiment for anyone who wants to explore the number illusion – the idea that we humans don’t handle numbers and prices quite right. It is possible that the ADR price will fluctuate slightly as a result. How much it does would be an interesting little test of the idea.
Why this is done is simply fashion these days. The success of these Covid vaccines has driven up the share price so much that some now consider it “too expensive”. The solution to this is a 2-for-1 stock split. Simply divide the shares in two and halve the price. Novo Nordisk is worth the same as before, but the shares look “cheaper” – another numerical illusion.