Will I receive share fractions after a corporate action?
Some corporate actions pay out new shares to shareholders. If you’re on the company’s share register when this happens, you’ll be allocated an exact number of shares (the precise amount is potentially rounded down so it’s a whole number).
But if you hold the shares in an AJ Bell Youinvest pooled nominee account which has other holders, the shares are allocated not to the individuals, but to the whole pooled account. Dividing this between holders can lead to share fractions – i.e. when your allocation includes a fraction of a share.
When this happens, we’ll first allocate new shares to you – and every other holder – to the nearest whole share. We’ll then sell the fractions left over in the market and pay the proceeds to all the holders in proportion to their entitlement.
Here’s an example of how this works in practice.
Let's suppose Company ABC plc is allocating new shares. They're allocating one new share for every three existing shares held. You hold 1,000 existing shares in the company, which equates to 333.33 new shares for you. As we have two other customers who also hold 1,000 shares (meaning we hold a total of 3,000 shares in our nominee account) we’ll receive 1,000 new shares.
We’ll allocate 333 new shares directly into your account and the accounts of the other two customers. This leaves one share left over. As it can’t be divided by three, we’ll sell it in the market. We’ll then pay each of you a third of the proceeds from this sale, minus any associated dealing costs.
Any fractions from the sale, which result in customers receiving less than 1 penny each, will be retained by us.
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- A share in my ISA is subject to a corporate action – are there any additional implications?
- How do I respond to a corporate action?
- Can I withdraw the cash received from a corporate action?
- What happens if I am late or do not respond to a corporate action?