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A friend told me, he is able to buy parts of a share. So he does not buy one or two shared but one and 1/5 of a share (1.20).

Is this a benefit from the digital age? Because in the past, when shares have been printed on paper, no one could by only a fraction, right?

How is this possible? And what does it mean for my common stock rights?

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    Your friend must have a broker that implements a system where the broker holds whole shares on behalf of a group of customers that may hold fractional parts. Public companies themselves tend not to issue fractional shares, but a broker's accounting system could deal with tracking partial ownership. If your friend wanted to transfer his account elsewhere, I'd wager his broker would only transfer his whole number of shares, and cash out any fractional parts. – Chris W. Rea Jan 16 '17 at 22:34
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    Public companies (or perhaps their transfer agent bank) dealt with fractional shares way back in paper certificate days in DRIP plans. I was earning reinvested fractional shares as a six month old in 1976. – user662852 Jan 17 '17 at 12:58
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It's typically not directly possible, but some brokers sell certificates that are valued at fractions of a share. Obviously these certificates should be backed by some real assets, but they can be backed by call options. It's unlikely you have voting rights with such constructs.

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    One example of such a broker in the U.S. is ShareBuilder, (from Capital One). Quote: "Not everyone can afford to buy a full share of a particular stock, so ShareBuilder offers its Customers the opportunity to purchase fractional shares of a stock through dollar based investing. [...]" See ShareBuilder Fact Sheet (PDF). In Canada, a similar service is from ShareOwner Investments, who call it a "co-operative investing service". Neither issues "certificates" for fractions though; it's an account. – Chris W. Rea Jan 16 '17 at 22:27
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This is called a fractional share. Usually it's only possible to buy fractional shares on the market when purchasing mutual funds.

How is this possible?

In the case of a mutual fund shares bought from the fund don't necessarily represent shares of a security. Instead, when you buy into a mutual fund you are essentially paying a professional to invest your money.

In the case of other investments, you can end up with a fractional share if a stock which you already own splits their shares into additional shares or merges or is acquired by another company. A fractional share behaves the same proportionally to a full share, but my take longer to sell since your brokerage will need to pair it up with other fractional shares.

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    generally if a split or merger would result in a fraction of a share, the leftover fraction is turned into cash. This feature is one reason why some reverse split are done, they want to drive out small investors. – mhoran_psprep Jan 16 '17 at 18:16
  • @mhoran_psprep, thank you for your contribution! If you would like to add it to my answer, feel free to make the necessary edits. – Nosrac Jan 16 '17 at 18:46

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