Fractional shares

You’ll be glad to know this is in the works and will be coming, It’s actually one of Freetrades selling points!

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Yes, this is on our roadmap here.

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Will we be able to sell fractions of existing whole shares when this is released?

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Not sure everyone has seen this, so bumping up for visibility. I imagine most users would want this.

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Hi,
In light of two amazing and successful Crowdfunding raises, I wanted to just make a point regarding customer satisfaction and client retention (clearly key success criteria for Freetrade, and for future upside potential for new equity holders in the company)…and that is the inability, or difficulty, of building a diversified portfolio without the functionality of Fractional Share Ownership.
I want to make this as brief as possible, and as simplistic as possible. Please indulge me for a second.

  1. Considered opinion is that we start to achieve true diversification benefits after around 20 stocks in a portfolio.
  2. Following the 2019 assumptions from the Crowdcube presentation;
    Average portfolio is roughly GBP700. Cash held is 10%. Foreign stock ownership is 50%
  3. Given the above, we have roughly the following;
    700-70 = 630 in stock (or ETFs but give me some licence). 50% of this is Foreign, currently US = 315. GBPUSD around 1.2750 means this is around USD 400.
  4. If we assume that of the 20 stock portfolio (minimum), 50% of this is in US and therefore comprises minimum 10 stocks…take a look at how many of these US stocks in the opportunity set you can own to the tune of 400/10 = USD 40.
  5. Around two thirds of the current offering has a stock price of >$50, and in fact around 45% is >$100…with some trading significantly higher.

I know that Fractional Shares are on the To Do list and that I am definitely not reinventing the wheel here, but at present there isnt quite the potential for a truly diversified portfolio…which must be one of the most important elements of the Freetrade ethos. Can we please elevate this to where it should be in the priority list?
I am also perfectly aware that I am no technician, and fully accept that some things that dont look like a priority to me, are in fact extremely important from a structural perspective.
My main point is that getting new clients on board is one thing; offering what they require to stay for the long haul also needs to be considered.
Thanks

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@fishfinger
I am following you on this, plus I am learning from your points because now I have to compliment my research, so thanks for that.
For everyone else, what would be the legal implications of this though? How much a fraction can be a fraction? Who actually owns it?

I would guess that for legal purposes Freetrade (or any mediator body) can own the share and then internally split, but to be fair I have tried to look into how this is done elsewhere and seems like a hugely convoluted situation.
I know the team is sorting it out and I am happy to wait but for sure some understanding on the steps to get it implemented would be very educational and help with retention.

Also, maybe someone would catch up this idea and hopefully doesn’t require revealing much of your secret sauce but, a techtalk about this would be great, because from a data point of view this whole splitting thing can get messy (just picturing it in my head)

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We shared that we’re making good progress towards offering fractional shares when we announced our new crowdfunding round earlier in the week :muscle:

(we’ll be offering fractional shares for US stocks too :us:)

The next step is to finish building our Investment Platform which will enable us to offer fractional shares in the app. We’re hoping to move everyone over to that platform by the end of the year.

I’m really excited about fractional shares for a few reasons:

  • They let you buy a portion of high priced stocks like Amazon or Berkshire Hathaway, rather than having to invest £1,000+ in one go :moneybag:

  • They let us give you a much better user experience when you place an order because you can set the amount that you want to invest & spend exactly that amount when you invest in a company :balance_scale:

  • They make reinvesting dividend payments, which are often quite small, possible. Saving you from having to keep cash in your account until you’ve saved up enough to buy a whole share :timer_clock:

  • They’d make providing automated investing much easier :robot:

Although please bear in mind that we might not have all of this functionality ready as soon as fractional shares launch :sweat_smile:

As they’re so great, fractional shares are a top priority, we just have some work to do to enable us to offer them first. We’ll keep you updated on our progress here & via the roadmap.

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Thank you so much for this! Great answer

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Hey :v:t3: What would happen when you are invested fractionally in a share, then the share gets split?

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Hi Alex,

Would it be possible to list the outcomes that a FT user will benefit from a Corporate Actions (if applicable) as a result of holding factional shares?

Corporate Action Result
Cash Dividend Fractional Cash Dividend
Stock Dividend Fractional Stock Dividend
Spin Offs Fractional Stock on the new Spin Off?
Reverse Stock Split ?
Mergers? ?
Tender Offer ?
Bonus Issue ?

Hopefully that makes sense?

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Just saw the crowdcube update about being granted FCA permission to deal fractional shares! Congratulations guys… This is huge news and a great step forward!

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Just saw this too, and came straight here. Anyone know the timeframe expected?

It will be huge for me, as my £50 per month I put aside for investments will have a lot of use still and I don’t have to save it up along with dividends to be able to buy some of these pricier ETF bonds I want!

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Saw the note on crowdcube too. Fantastic news. Bring on the investment platform :grin:

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An update has just been posted on Crowdcube for this. How exciting. Massive news :smiley:

https://www.crowdcube.com/companies/freetrade/pitches/ZpvDyq/updates/b211pZ#

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Exciting times for the FT community!

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Dividend re-investments: Will they be free?

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Wow, really exciting news! This is one the big things that attracted me to freetrade initially so it’s fantastic it’s finally on the way.

It looks from the update that the US fractionals will be launched after the UK ones? Will this only happen once the investment platform is launched?

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When is this looking likely to land?

The updated roadmap is being released tomorrow. It has rough timeframes, so hopefully we’ll be able to gauge it from that. I’m assuming this is a priority though as it is one of FT’s USPs.

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Assume this will be top of the list now Revolut has come in offering fractionals immediately. This would be a game changer for the small investor.

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