What would happen if I hypothetically had one share of a stock that is undergoing a reverse stock split? This would be an odd predicament but I just read about someone in this situation and can't really find an answer. Let's say for kicks the reverse stock split is 1 for 2. So after this r/s I would own .5 share? Is this even possible?

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    It's fairly common for them to just cash out the fractional share at that point, making you no longer a stockholder. Some companies have even done this intentionally as part of a spin-off from larger companies, as they wind up with huge numbers of shareholders (high administrative costs) all holding a handful of shares each. A reverse split lets them get their price into the range they're looking for, but it also lets them thin the number of shareholders. Commented Mar 5, 2016 at 7:58
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    @ZachLipton But what if the shareholder does not want to cash out? Are they forced to?
    – NuWin
    Commented Mar 5, 2016 at 8:00
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    Yes. The shareholder can, of course, purchase the stock again if they want to continue to own it, but they'll have to buy at least one share at the new price. The sale and subsequent repurchase may well be considered a wash sale by the IRS (assuming US taxes). Commented Mar 5, 2016 at 8:02
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    Well that sucks for the shareholder principally speaking, but it makes sense. Thanks for the clarification.
    – NuWin
    Commented Mar 5, 2016 at 8:07
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    As they publish the intent upfront, you could just buy upfront the missing 'small' shares so you end up with a single 'large' one after the action.
    – Aganju
    Commented Mar 5, 2016 at 15:24

1 Answer 1


Any time there is a share adjustment from spin-off, merger, stock split, or reverse slit; there is zero chance for the stockholders to hang on to fractional shares. They are turned into cash.

For the employees in the 401K program or investors via a mutual fund or ETF this isn't a problem. Because the fraction of a share left over is compared to the thousands or millions of shares owned by the fund as a collective.

For the individual investor in the company this can be a problem that they aren't happy about.

In some cases the fractional share is a byproduct that will result from any of these events. In the case of a corporate merger or spin-off most investors will not have an integer number of shares, so that fraction leftover that gets converted to cash isn't a big deal.

When they want to boost the price to a specific range to meet a regulatory requirement, they are getting desperate and don't care that some will be forced out.

In other cases it is by design to force many shareholders out. They want to go private. They to 1-for-1000 split. If you had less than 1000 shares pre-split then you will end up with zero shares plus cash. They know exactly what number to use. The result after the split is that the number of investors is small enough they they can now fall under a different set of regulations. They have gone dark, they don't have to file as many reports, and they can keep control of the company.

Once the Board of Directors or the majority stockholders votes on this, the small investors have no choice.

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