What is a fractional share?
A fractional share is a fraction of a whole share. Companies issue whole units of stocks, called shares, which are then traded on the public market for investors to buy. If you buy a fractional share, that means you are buying a piece of a company's stock.
Whereas a single share in a company might cost USD1,000, fractional shares mean you can still invest in a company with USD10 or USD100. You can invest in fractional shares in stocks and ETFs on the Revolut platform.
Limits to buy fractional shares: You need to invest at least USD1 for US securities and EUR1 for EU securities. The minimum amount of shares you can buy is 0.00000001. Currently, you can’t submit limit orders for fractional shares.
Risks of fractional shares.
Voting rights: Fractional shares do not carry voting rights, so you cannot participate or vote in corporate shareholder meetings - this is only possible when at least 1 whole share is owned.
Transferability restrictions: Fractional shares cannot be transferred between brokers, so if you decide to transfer your investment portfolio, your fractional positions must be sold (liquidated).
The sale could occur at a time when market prices are unfavourable, resulting in a loss or the sale could cause tax consequences.
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Liquidity constraints: Transactions in fractional shares are not executed on public stock exchanges. Instead, brokers generally execute such trades through their own account.
If an instrument ceases to be eligible for trading, e.g. due to delisting, fractional holdings may be difficult or impossible to liquidate, potentially preventing investors from accessing their value.
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Price volatility: In the case of fractional shares, the broker’s involvement in the execution process may result in a delay between the moment you place an order and the moment you become the owner.
As a result, the price initially displayed may differ slightly from the final execution price due to market fluctuations occurring during that interval.