What is fractional shares and can they be sold ?

A fractional share is a portion of a full share of stock, representing less than one whole unit. Such shares typically arise from corporate actions like stock splits, bonus issues, mergers, acquisitions, or through Dividend Reinvestment Plans (DRIPs).

Can we sell fractional shares?

Since the fractional shares don’t trade in markets, the company appoints a trustee to buy the fractional shares. The trustee then buys back those fractional shares from the investors, and the proceeds are then credited to the primary bank account of the shareholders.

How do fractional shares arise?

• In case of a stock split:
  If you own 7 shares of a company and it undergoes a 3-for-2 stock split, you would receive,7 × 3/2 = 10.5 shares. The 0.5 share is a fractional share.

• In case of a merger:
  If you hold 29 shares of a company that merges with another, and the exchange ratio is 5:1, you would be entitled to 5 shares (since 5 × 5 = 25) of the new company, leaving you with 4 shares of the old company.
  If the company allows, you might receive a fractional share of the new company for the remainder 4/5 = 0.8 share.

• In case of a direct purchase plan:
  If a stock costs ₹10,000 per share and you invest ₹1,000, you would own a 0.1 (one-tenth) fractional share.