What Is a Fractional Share?

1. Stock Splits or Bonus Issues: When a company undertakes a stock split or issues bonus shares, fractional shares can result if the number of shares allocated to shareholders is not a whole number.

• The investor would receive 4.5 additional shares (9 × 3 ÷ 2 = 4.5).
• This increases their total shares to 13.5.
• However, companies typically round up fractional shares to the nearest whole number, so the investor may receive 14 shares instead.

1. Mergers or Acquisitions: Fractional shares may also result from an unequal share swap ratio during a merger or acquisition.

• The investor receives 5 full shares of XYZ Ltd (29 ÷ 5 = 5 shares).
• This leaves a balance of 4 shares in ABC Ltd., which translates to 0.8 fractional shares in XYZ Ltd (4 ÷ 5 = 0.8).

Can Fractional Shares Be Sold?

Key Takeaways

• Fractional shares result from corporate actions such as stock splits, bonus issues, or mergers.
• These shares cannot be traded directly in the market.
• Companies round up or buy back fractional shares, and the cash equivalent is credited to the shareholder’s bank account.