Fractional Shares in Corporate Actions

Forward and Reverse Stock Split

In the event of a stock split, you may receive fractional shares of a company depending on the terms and conditions of the split.

For example, if you held 10 shares of a security that experienced a 1:7 reverse stock split, then the quantity of the stocks you hold would be adjusted into 1.43 shares.

If you have fractional shares positions in a company undergoing a forward or reverse stock split, the company’s number of outstanding shares and price will be affected. For example, you have 1.50 shares of XYZ at USD10 per share. If XYZ performed a 2 for 1 (2:1) forward stock split, you would have 3 shares of XYZ at USD5 per share. If XYZ performed a 1 for 2 (1:2) reverse stock split, you would have 0.75 shares of XYZ at USD20 per share.

In summary, a forward stock split increases the number of the company’s outstanding shares, and a reverse stock split decreases the number of the company’s outstanding shares. However, there is no change in the company’s market value when both types of stock splits occur.

Dividends and Shareholder Rights

You would be eligible to receive a proportionate dividend payment if you own fractional shares of a dividend paying stock. However, for shareholder rights, only individual investors who own whole shares would be eligible to participate in important company and voting decisions by proxy.

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