Fractional Share

A fractional share describes a fraction of one full share.

Investors can sometimes end up with fractional shares mostly due to the share split exercises meant to incentivize current share holders.

For example, a company might announce a 2% stock dividend. A shareholder with 110 shares would then get 2.2 shares for the dividend. The 0.2 is a fractional share.

Fractional shares are not the exclusive result of share splits.

They can also occur in other corporate events like: merger and acquisitions.

While a shareholder can hold onto the fractional share, they might find it difficult to sell them on the open market.

However, brokerages can help sell them as they combine other fractions to make up whole shares, sell them, and distribute the sales proceeds accordingly.

When investors end up holding fractional share, they can usually purchase the remaining fraction that would make the share fraction into a full share. The amount of money paid would be called a cash fraction.



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