What is a fractional share?

A fractional share is a portion of an equity stock that is less than one full share. Fractional shares allow you to purchase stocks based on the dollar amount you want to invest, so you may end up with a fraction of a share, a whole share, or more than one share. 

 

Fractional vs Full shares offered by eToro

Fractional

Full

Dividends or interest for holding a fraction of a share, following a corporate event, are provided proportionally. 

Dividends or interest for holding a share, following a corporate event, are provided per share. 

eToro holds shares in custody on behalf of the client and the transaction is recorded in eToro’s system under the client’s name.

Shares are owned as “tenants in common” by the client and eToro. This means that for the purchased fraction of the share, you have the same benefits and economic advantages as “common” owners of the share.

No leverage 

Market risk remains alike 

Corporate actions are treated the same when it comes to a whole share or a fraction of a share, in proportion to your Fractional Share position.

 

Benefits with eToro

  • Less capital is needed to invest in shares since clients can buy a portion of the share.
  • Clients are able to invest in different shares (e.g., diversification of risk) assuming the same amount of capital.
  • Brokerage and transaction fees for stock buying transactions are removed.
  • eToro is not making use of voting rights as the shares are acquired under the status “Tenants in common.”
  • Easy access to financial markets via opening an account with eToro
  • Access to eToro Social Feedfor market updates and exchange of views with other investors
 

Downsides with eToro

  • Clients waive any rights to vote 
  • Shares cannot be transferred outside the eToro platform
  • Not all publicly traded stocks are available yet on the eToro platform
 

Why eToro offers fractional shares

  • eToro is a multi-asset platform committed to offering multiple investment options and education to its clients in order to invest wisely.
  • Fractional shares make investing in non-complex instruments affordable to our client base and allow our clients to diversify their portfolios by also trading in non-complex instruments.
  • Fractional shares allow you to start investing with much less initial capital in "real shares" without the risks related to other types of complex financial instruments.
 

What happens if a company becomes insolvent  and a client holds a fraction of a share?

  • The client that holds a fraction of a share has the same rights as clients who hold full shares and they can pursue their rights in courts.
 

Prices on stocks that investors see on the eToro platform

  • Share prices feed are based on a live NASDAQ for US shares and CBOE for European stocks
 

Corporate actions are treated the same when it comes to a whole share or a fraction of a share, in proportion to your fractional share position.

  • Dividends: Once the Payment of the Cash Dividend is confirmed, eToro uploads compensation per share (fractional shares receive the relative amount to your holdings).
  • Splits: We apply the same split ratio in all of your holdings on the same effective day as the exchange.
  • Reverse splits: Also, as regular splits. The same ratio is applied to all holdings on the effective date.
  • Rights issue: On rights issues, we do not distribute the rights, but we distribute the cash equivalent of the Corporate Action. The amount to be compensated is calculated by the eligible closing price applying the adjustment factor provided. Payment is processed to you after we liquidate all of the rights we received from the custodian on the trading dates of the rights.