Whole shares: Overview, definition, and example
What are whole shares?
Whole shares refer to individual, complete units of a company's stock that are bought, sold, or held in an investment account. Unlike fractional shares, which represent a portion of a share, whole shares are the full, indivisible units of ownership in a company. When an investor purchases shares in a company, they typically acquire whole shares, and each share represents a proportional stake in the company.
For example, if an investor buys 100 whole shares of a company, they own 100 full units of that company’s stock, with each share granting them certain rights, such as voting rights and the right to receive dividends.
Why are whole shares important?
Whole shares are important because they represent the basic unit of ownership in a company and are the most common form of stock traded in the market. Most stock transactions occur with whole shares, making them the standard for trading and investing in public companies. Whole shares also allow investors to calculate their exact ownership percentage in a company, as each share represents an equal portion of the company’s equity.
While fractional shares have become more common due to the rise of fractional investing platforms, whole shares remain the traditional method for stock ownership. They are also important for the calculation of dividends, voting rights, and other corporate benefits.
Understanding whole shares through an example
Imagine you decide to invest in a company, Company A, which has a stock price of $50 per share. You have $500 to invest, so you purchase 10 whole shares of Company A. By doing so, you now own 10 units of Company A, with each share valued at $50, for a total investment of $500.
If Company A declares a dividend of $2 per share, you will receive $20 in dividends (10 shares x $2 per share). Additionally, you have the right to vote in shareholder meetings, with each share granting you one vote.
Example of whole shares in a contract
Here’s how a clause related to whole shares might appear in an investment agreement:
“The Investor agrees to purchase [X] whole shares of the Company at a price of $[Y] per share, for a total investment of $[Total]. These shares will represent the Investor's full and undivided ownership stake in the Company and will entitle the Investor to receive dividends, vote at shareholder meetings, and participate in any other rights associated with full ownership of shares.”
Conclusion
Whole shares represent the full, complete units of ownership in a company’s stock. They are the most common form of stock ownership and are typically the basis for trading, dividend distribution, and shareholder voting.
For investors, whole shares provide clarity on the exact number of units they own, and they offer direct access to the rights and benefits associated with owning company stock. Understanding whole shares is fundamental for anyone investing in public companies, as they are the primary unit of measurement for stock ownership.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.