THE GLOBAL DIMENSION

of ``diluting'' the stock by increasing the number of shares in issue.
Novo's share price dropped by nearly a third.

The following year, US investors became enthusiastic about the

potential of biotechnology. In 1980 Novo promoted itself in New York
and US investors began to buy its shares and convertible bonds in
London. By the end of the year its share price was double its 1997 price
and the company was 30% foreign-owned.

In 1981, Novo sought to expand its appeal to US investors by creating

American Depositary Receipts (ADRs), obtaining an over-the-counter
listing on NASDAQ and preparing for a listing on the New York Stock
Exchange. The challenge was to prepare accounts according to US
accounting standards and to fulfil the stringent information disclosure
rules in the US. Its share price continued to rise, and the Danish
investment community persistently described the company as grossly
overvalued. When Novo made a $61mn share issue in New York, Danish
investors sold hard, while US investors piled in, confident that the NYSE
listing would provide adequate liquidity, which had previously been
a worry. The company had achieved its objectives access to much
more capital at a significantly lower cost.

KEY LEARNING POINTS

» Multinational companies and their affiliates are a hugely impor-

tant element in world trade, accounting for around a third of the
world's GDP. Although the biggest MNCs are concentrated in
a few sectors, such as oil and autos, the diversity of MNC busi-
nesses is very wide. Since the 1980s, there has been a substantial
growth in the number of MNCs from newly industrialized coun-
tries, particularly in East Asia, a region that has become a third
major force in world trade (the others being the US and Europe).

» MNCs can have substantial effects on the economies of countries

and there is tension between them and governments who, while
wanting the benefits that foreign MNCs can bring, wish to
regulate their activities.

» Companies have substantial opportunities to improve their

financial position by issuing shares or borrowing in the global
markets. While the biggest MNCs enjoy these benefits as a