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. Usually, the precise amount is rounded down so it’s a whole number.

However, if you hold the shares in an AJ Bell pooled nominee account with other holders, the shares are allocated to the whole pooled account. Dividing this between holders can lead to share fractions (allocations including a fraction of a share).

When this happens, we do a few things:

  1. First, we allocate new shares to you and every other holder (to the nearest whole share)
  2. Next, we sell the remaining fractions in the market
  3. Then, we pay the proceeds to all the holders in proportion to their entitlement

Here’s an example of how this works in practice.

  • Company ABC plc allocates 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 allocate 333 new shares directly into your account and the accounts of the other two customers, leaving one share leftover
  • As it can’t be divided by three, we’ll sell this share 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 one penny each, will be retained by us.