Going Public vs. Being Acquired

IPO vs Acquisition: Advantages and Disadvantages

An IPO is an initial public offering, when a company makes its shares available for public trading, and it’s quite different from an acquisition. IPOs are synonymous with entering a new market, while an acquisition is typically when a larger company takes over a smaller target company.

What does IPO mean vs. an acquisition? When a company applies for an IPO, it entering into the traditional process to be listed on a public exchange and get funding from individual investors. In an acquisition, or takeover, the target company may not survive — or it may thrive, but only as part of the newly combined organization.

Investors contemplating companies at these two different stages would do well to think through the benefits and risks.

How IPOs Work

When companies go public it’s when a private company decides to sell its shares to raise capital to fund growth opportunities for the company; create more awareness about the company; or to acquire other businesses, among many other possible reasons.

The IPO is the process of selling securities to the public. The company decides how many shares it wants to offer. The price of the company shares are determined by the company’s valuation and the number of shares at listing, and the funds raised by the IPO are considered IPO proceeds.

Once the IPO is approved, the company is then listed on a public stock exchange where investors can buy shares of the IPO stock.

Advantages of Going Public

What are the advantages of going public? There can be many, which is why companies aspire to go through this arduous process.

Capital for Investment

The biggest advantage associated with an IPO is fundraising. Once investors start buying IPO stocks, the proceeds from an IPO can be substantial. The company then takes this capital and typically uses it toward internal investments and expansion. The company can use the funds it raises for research and development, to hire more staff, or expand its operations in other states or countries. There are a variety of ways this new capital can be deployed to benefit the company.

Publicity

IPOs generate a lot of publicity. This, in turn, can drive more attention to the company and make investors interested in purchasing shares of its stock. IPOs are frequently covered in business news, which adds to the IPO buzz.

Valuation

Many companies that go public can end up having higher valuations. Because the public company has access to more capital and steadily grows its business, the shares of the company can increase in price over time.

Disadvantages of Going Public

What are the disadvantages of going public? There are a series of steps and regulations companies must adhere to in order to have a successful IPO — and the process can be time consuming and difficult.

High Cost

The first factor a company must consider is cost. The company needs to work with an investment bank, which will charge underwriting fees — one of the largest costs associated with an IPO.

Underwriting is mandatory to review the company’s business, management, and overall operations. Legal counsel is also required to help guide the company through the IPO. There are also costs associated with account and financial reporting. Companies will also accrue fees for applying to be listed on the exchange.

Not Enough Information for Investors

From an investor’s perspective, investing in an IPO can also be a challenge. In many cases, individual investors don’t have enough information or historical data on the company’s performance to make a determination on whether an IPO is a sound investment.

Stock Market Stress

Once a company goes public, it is now part of the public market. This means it is subject to scrutiny, market volatility, and investor sentiment. Every move and decision the company makes, such as a corporate restructuring, merger and acquisition, change in leadership, or release of earnings reports, will be reviewed closely by industry analysts and investors, who will provide their own opinions on whether the company is operating well or not.

While the company’s leadership may not have had to worry about these aspects when it was private, a public company needs to keep these market pressures top of mind.

What Is an Acquisition?

What does it mean for a company to be acquired? Similar to a merger, an acquisition is when one company buys a portion or the whole of another company and all its assets. An acquisition is the process of the acquiring company taking full control of the target company.

If the acquiring company takes more than 50% of the target firm’s shares, this gives the acquiring company control over decision making regarding the target company’s assets. While acquisitions of well-known and larger companies occur and are covered by the news, companies of any size can be the acquiring company or target company.

Advantages of Being Acquired

Being acquired doesn’t have to signal the end of a company — sometimes it can be a lifeline.

Growth

An acquisition can be a strategy for a company to grow into new markets and quickly become a leader in its industry. If the company is working in a competitive landscape, an acquisition helps increase its value and can add to a company gaining more market strength.

Innovation

When one company acquires another, this allows resources and experiences to come together. This may enable the new company to innovate new ideas and strategies that may eventually help grow the company’s earnings. This new partnership can bring together a new team of specialists and experts that can allow the company to develop and reach its goals.

More Capital

When an acquisition occurs, this will increase the cash holdings and assets of the acquiring company and usually allows for more investment in the newly formed company.

Opportunities With IPOs

Investing in IPOs can be a great opportunity for individual investors to get in at an early stage of a company’s growth. When you participate in an IPO, investors purchase shares at the stock’s offering price before it begins trading in the secondary market. Prior to investing in an IPO, it’s important to do your research to make sure you understand the risks of the investment.

Disadvantages of Being Acquired

It’s hard to avoid the negative implications of an acquisition, and investors need to consider these as well.

Conflicting Priorities

In some acquisition scenarios, there may be competing priorities between the two companies that come together. The acquiring company and target company prior to the acquisition were used to working as individual entities. Now, as a newly formed company, both sides must work together to be successful, which is easier said than done. If there isn’t alignment on the goals of the organization as a whole, then there is a possibility that the acquisition may fail, or the transition could be rocky and prolonged.

Pressure on Existing Partnerships

When an acquisition occurs, the newly formed company becomes bigger and it is likely that their goals will grow as well. In the case where the company wants to develop more products to expand into new markets, this could require their suppliers to figure out how they are going to ramp up production to meet the demand.

For example, this could mean the supplier would need more capital to hire staff or purchase additional equipment and supplies to prevent production issues.

Brand Risk

Depending on which companies come together, if one has a poor reputation in their industry, the acquisition could put the other company’s brand at risk. In this case, both of the companies’ identities could be evaluated to decide whether they come together under one brand or are marketed as separate brands.

The Takeaway

Initial public offerings (IPOs) and acquisitions often get a lot of media and investor attention because they can offer opportunities for investors. That said, these two events are quite different.

An IPO is when a private company decides to go public and sell its shares to individual investors, whereas an acquisition is when a company buys out another, target company. In this case the acquiring company may gain certain market advantages, and the target company will typically lose its decision-making privileges since it is no longer an individual company.

There are a number of pros and cons to IPOs, just as there are advantages and disadvantages of a company being acquired. IPOs can provide a newly minted public company with a lot of growth opportunities — but the IPO process is expensive and time consuming, and being beholden to regulators and investor sentiment is never a picnic.

Acquisitions can be a lifeline to a company that’s struggling in a competitive market. While the takeover can effectively eliminate the target company as an independent entity, its products or brand may continue to exist.

If you’re interested in setting up your own portfolio, and including IPO shares, you can open an Active Invest account with SoFi Invest and get started right away. Why wait? The market is full of opportunities, and once you know your priorities, you want to be able to take action.

For a limited time, opening and funding an account gives you the opportunity to win up to $1,000 in the stock of your choice.

FAQ

Is an acquisition an IPO?

An acquisition is not an IPO. An acquisition is when an acquiring company purchases part of or all of a target company to form one new company.

What is the difference between an IPO and a takeover?

An IPO is when a private company decides to go public and sell its shares to individual investors, whereas a takeover is when a company buys out another company.

Is a takeover an acquisition?

An acquisition can be a takeover. This is when two companies decide to come together and become one entity. All the assets of both companies are now part of a newly formed combined company.


Photo credit: iStock/Yuri_Arcurs

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Ethereum Price History: 2015-2022

Ethereum Price History: 2015-2022

Ethereum is the second-largest cryptocurrency by market cap after Bitcoin, and it was the first to introduce blockchain-based smart contract technology. In part thanks to Ethereum’s many innovations, the value of ETH has been relatively high over the last seven or eight years — with a historic low of about 42 cents and an all-time high of about $4,800 in November of 2021.

The concept for the Ethereum platform was first proposed in a white paper by Vitalik Buterin in 2013. In 2014, he and a team of developers raised about $18 million to establish the nonprofit Ethereum Foundation and fund its development. The Ethereum platform launched in 2015.

From the beginning, the vision for Ethereum was distinct from Bitcoin or any other cryptocurrency at the time. The larger idea for Ethereum was to create a programmable blockchain that would enable a sort of free market environment, where developers could create applications and programs without any control or interference from a third party.

Ethereum Price History

The innovative spirit of the Ethereum blockchain has sustained its value over the years.

Many blockchain-based projects have been built on the Ethereum network, including countless decentralized finance (DeFi) apps, non-fungible tokens (NFT), and a long list of utility tokens that serve various use cases.

The Ethereum Virtual Machine (EVM) powers these automated agreements.

When it was launched in 2015, the price of 1 ETH was under a dollar – starting at $0.74. In 2016, the cryptocurrency was listed on Coinbase and was trading between $7 – $10. By 2017, a volatile year, the price skyrocketed as high as $1,600 before falling by about 95%, to $80.

Over the next few years, ETH would eventually see another bull market, taking its price to a new all-time high of $4,815 in November 2021. Since then, the price has fallen again, and was trading around $1,124, as of November 9, 2022.

Ethereum (ETH) Price History

Year

High

Low

2015 $1.39 $0.42
2016 $21.25 $0.93
2017 $881.94 $7.98
2018 $1,119.37 $82.83
2019 $361.40 $102.93
2020 $533.00 $95.18
2021 $4,815.00 $718.11

Ethereum Price in 2015: Starting Price

Price of Ethereum in 2015: $0.42 to $1.39

In 2015, the year that Ethereum first launched, the price started at around $0.74 and the lowest closing price for ETH was $0.42.

The year 2015 was the only time when Ethereum was worth one dollar or less, with the exception of January 2016.

There weren’t many significant events for the Ethereum price history in 2015. The network had only just been launched and the ETH token had little value.

Ethereum Price in 2016: First Hard Fork

Price of Ethereum in 2016: $0.93 to $21.25

Early 2016 was the last time that Ethereum was worth less than a dollar. The lowest price for ETH was in January, around $0.93. ETH climbed as high as $21.25 in June before falling back to $6 in December.

There were several significant Ethereum-related events that happened in 2016. Ethereum saw what was at the time the largest crowdfunding in history with its Decentralized Autonomous Organization (or DAO). The DAO was then hacked when attackers exploited an aspect of the crowdfunding mechanism inside a smart contract that allowed them to withdraw ETH from the fund.

As a result of this attack, Ethereum developers decided to hard fork the network. This allowed them to roll back the blockchain to a time when the DAO hack had never happened.

The original chain then became Ethereum Classic (ETC), and the new chain became Ethereum (ETH). This event is sometimes referred to as the ETC/ETH split.

In other important crypto news, ETH became the second-ever crypto to be listed on Coinbase in July of 2016. Up until that time, Coinbase users could only buy and sell Bitcoin. This helped set the stage for Ethereum’s massive bull run over the next few years.

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Ethereum Price in 2017: Becoming Mainstream

Price of Ethereum in 2017: $7.98 to $881.94

In 2017, awareness of Ethereum began to grow, and the ETH price started to soar. The lowest price for ETH that year was just under $8, where it began in January. The ETH price then rose as high as $881.94 by December.

In 2017, the crypto asset class as a whole started going mainstream. Bitcoin rose from about $1,000 in early 2017 to as high as $19,000 by December 2017. Ethereum and many other altcoins came along for the ride, seeing even more dramatic price increases. During this time, ETH would solidify its place as the second-largest cryptocurrency by market cap, where it still sits today.

Ethereum Price in 2018: Breaking $1K

Price of Ethereum in 2018: $82.83 to $1,119.37

In 2018, Ethereum reached $1,119.37, the highest price it had ever been at the time. But by December, the lowest price for ETH was $82.83, as the infamous “crypto winter” set in, and many cryptocurrencies saw their values plummet by 90% or more.

While there weren’t many significant events pertaining to Ethereum specifically in 2018, there was a lot of FUD (fear, uncertainty, doubt) surrounding crypto in general at this time. Many media reports declared that Bitcoin and cryptocurrency were “dead” after the market shed hundreds of billions of dollars off its total market cap.

Just two years earlier, in 2016, the entire cryptocurrency market cap had been under $10 billion. At the peak in 2018, it topped out at $820 billion, representing a rise of more than 80x in just a few years as traders piled into a speculative mania that would go down in history as one of the biggest asset bubbles ever.

Ethereum Price in 2019: The Uneventful

Price of Ethereum in 2019: $102.93 to $361:40

The lowest price for Ethereum in 2019 was $102.93, more than 90% down from $1,432, the highest price Ethereum had ever been at that point in time.

There weren’t many significant events regarding the Ethereum price history in 2019. It wasn’t a very eventful year in crypto.

Ethereum Price in 2020: The Coronavirus Effect

Price of Ethereum in 2020: $95.18 to $533.00

Ethereum began 2020 at about $127, a price not far above where it began the previous year. Times were tough, owing to the pandemic. But ETH was able to find its footing toward the end of the year.

In Q1 2020, the coronavirus pandemic and associated lockdowns led to a worldwide sell-off across all asset classes. Crypto was no exception. Ethereum fell below $100 in March 2020 before climbing higher in the second half of that year. This set the stage for the epic bull run of 2021.

Ethereum Price in 2021: Epic Bull Run

Price of Ethereum in 2021: $718.11 to $4,780.73

The lowest price for ETH in 2021 was $718. This year saw the highest price Ethereum has ever been, at $4,815.00. This smashed the previous record high of over $1,400.

2021 saw a bull market in most asset classes, including stocks, bonds, real estate, and crypto. The total crypto market cap crossed $3 trillion for the first time that year. Ethereum was supposed to undergo an upgrade (called the Merge) in 2021, but it was pushed to September of 2022.

Ethereum Price in 2022

Price of Ethereum in 2022: $896 to $1,965

The lowest price for Ethereum in 2022 so far has been $896, while the high has been $1,965. The price is currently hovering around the $1,100 level, as of Nov. 9, 2022.

Owing in part to the economic crisis brewing in early 2022, thanks to inflation and rising interest rates, crypto valuations have plummeted in value this year. The stablecoin crisis in early Q2 didn’t help, as Terra and its linked crypto LUNA, crashed. As of Q4 of 2022, the crypto markets had lost billions in value, and 2022 has been dubbed the next crypto winter.

Even Ethereum’s successful migration from a proof-of-work system to a proof-of-stake network in September has not yet delivered additional price momentum — but at least it’s not as low as some of its competitors. The merge marks the end of traditional crypto mining as a way to generate new Ethereum tokens.

💡 Recommended: What Is Ethereum 2.0? How Will It Be Different?

Considerations When Investing in Ethereum

Cryptocurrencies are volatile, and many altcoins, including ETH, can be even more volatile than Bitcoin. This increases the chances for outsized gains as well as steep losses. When investing in ETH, it’s important to consider a project’s past and future. The DAO hack of 2016 resulted in the ETC/ETH split, something that interested investors may want to consider researching further.

Another important factor to consider is Ethereum’s “merge,” or upgrade from a proof-of-work consensus mechanism to a proof-of-stake one. While this evolution hasn’t yielded big gains, it’s possible that the greater energy efficiency across the Ethereum network could still yield unforeseen benefits.

The Takeaway

Ethereum is one of the oldest and most successful crypto networks. It has made the DeFi revolution possible, thanks to its development of smart contracts and other innovative uses of blockchain technology.

Still, there’s no getting around the fact that crypto prices are volatile. Ethereum price history is one of ups and downs, ground lost — and ground regained. Ethereum launched with a value of about 1 dollar in 2015 and early 2016, but since then the price has soared way beyond those levels.

A correction of almost 95% happened after Ethereum’s 2018 high of over $1,400, and a correction of over 80% occurred after the more recent 2021 high of over $4,800, the highest price Ethereum has ever been.

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SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

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What Are Fractional Shares and How Do They Work?

With the price so high for some stocks, how can the average person ever hope to invest? Enter fractional shares: Instead of purchasing a stock at its full price, it’s possible to purchase a fraction of one share of a stock.

This raises the questions: How do fractional shares work, how can you buy partial shares of a stock, and are fractional shares worth it?

What Is a Fractional Share?

Fractional shares of a stock are also known as fractional equity shares or partial shares of a stock. Typically, investors can buy fractional shares based on a dollar amount, rather than the current trading price of one share.

Example of a Fractional Share

Let’s say Stock A is trading at $250 per share. You like this company and want to buy their stock, but you only have $50. With fractional share investing, it’s possible to buy $50 or ⅕ of Stock A.

Fractional Shares vs Whole Shares

While fractional shares are similar to whole shares, they don’t trade on the open market as a standalone product. Rather, fractional shares must be sold through a major brokerage.

How Do Fractional Shares Work?

In brief, investors can buy fractional shares of a stock through a brokerage account, and reap the same returns and dividends, proportional to the amount of stock they own.

To buy fractional shares, it helps to understand how and why they exist. Sometimes a fractional share is the result of a stock split, company merger or acquisition, or dividend reinvestment plan (called a DRIP).

Stock Split

In order to lower its price per share, a company may initiate what is called a “stock split.” A stock split may not always result in an even number of shares.

For example, in a 3-for-2 stock split, a company provides a third share for every two owned by an investor. If the investor initially holds 125 shares, they will own 187.5 shares after the stock split.

The investor still owns the same amount of stock in dollars, because the value of those shares will simultaneously drop by one-third. Sometimes, the company will just transfer cash to you in exchange for any fractional shares remaining.

Company Merger & Acquisition

A company merger or acquisition may also result in the creation of fractional shares. When one company acquires another, they may offer their shareholders the option for a stock merger (as opposed to cash merger).

With a stock merger, investors will receive a “conversion ratio,” which is the ratio that converts the shares of the company being acquired. This can result in fractional shares.

Dividend Reinvestment Plans (DRIPs)

Some, though not all, stocks pay dividends to investors. These dividends, which can be paid monthly, quarterly or annually, represent a percentage of the company’s profits that are then paid out to shareholders.

If you purchase shares of dividend-paying stocks fractionally, then you can receive dividend payouts from those stocks just the same as you would if you purchased full shares. The dividend payout you receive would be proportionate to your ownership stake in the stock. So, say you own a half a share of a stock that pays out a $4 dividend per share to its investors. You’d be able to collect half of that dividend payment or $2.

Dividend Reinvestment Plans or DRIPs can also produce fractional shares. Companies can offer DRIPs to investors as a way to reinvest in that company’s dividend-paying stock. When a stock pays out a cash dividend to its shareholders, the DRIP reinvests the money back into the stock automatically, even if the amount of the dividend isn’t enough to purchase an entire share.

DRIPs are a popular option because they don’t often have trading commissions or other brokerage fees.

Cash in Lieu of Fractional Shares

It’s possible that you may be offered cash in place of (in lieu of) fractional shares in certain situations. Instead of crediting you with additional fractional shares, the company you’ve invested with would sell those shares. They’d then send you a check representing the amount of cash resulting from the sale.

A cash-in-lieu situation can happen when a company undergoes a major transition, such as a merger or acquisition. They can also occur when there’s a stock split. It can be easier for companies to simply sell fractional shares and pay investors cash for them, versus creating new fractional shares.

If you receive cash in lieu of fractional shares, you should also receive a Form 1099-B from the company showing how much was paid to you. You’d need to include this form when filing your taxes since the IRS requires investors to account for these payments.

Can You Buy Half a Stock?

The simple answer is yes, you can buy half a stock if you’re using fractional shares to invest. With fractional shares, it’s possible to buy stock without having to purchase the entire share. Instead, you use whatever dollar amount you have available to build a portfolio.

For example, a beginning investor might have $500 to purchase shares of stock. But the stock they want to buy is trading at $1,000 per share, putting it out of reach. Thanks to fractional shares, they could still invest the $500 by purchasing 0.5 of a single share.

Then, once they have another $500 to invest, they could purchase another half share, which would allow them to own one full share altogether. Or they could use that money to buy another type of stock. There’s no rule requiring you to own full shares.

Fractional shares allow investors to purchase stocks in increments that fit their financial situation. So for instance, it’s possible to buy half of a stock but you could also use fractional investing to purchase one-quarter or one-third of a stock. This type of strategy is also known as dollar-based investing, since it’s based on the amount of money someone has to invest, rather than an investment’s purchase price.

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Advantages of Buying Fractional Shares

Investing money this way can offer some benefits, but are fractional shares worth it? They can be, if they help to further your overall investment strategy and goals.

Removing Barriers

The primary advantage of buying a fractional share is that investors are able to buy part of a stock that may otherwise be too expensive. In this way, fractional shares dismantle a large barrier to entry for those who want to invest.

Fractional share investing can also give young or new investors access to stock markets so that they can learn about them and investing firsthand.

For some, this hands-on approach to learning may be a more effective form of education than thinking about investment ideas or concepts in theory.

Increased Control

With fractional share investing the investor controls precisely how much money they want to spend on a stock. Fractional shares allow an investor to build their portfolio even if they don’t have a significant amount to invest.

This could allow investors to participate in the stock market for a longer period of time, without having to time the market.

Additionally, it can help investors buy the stocks that they actually want to hold in their portfolios, not just the ones that they can afford.

Increased Diversification

Because an investor can buy a variety of stocks using the money they have available, it may be easier to help in building a more diversified portfolio. Diversification, the idea that investors can mitigate some risk in their portfolios, is generally achieved by buying a variety of investments.

With more control over how much of each stock they can buy, investors could potentially construct a portfolio that is diversified to their liking.

Disadvantages of Buying Fractional Shares

Here are some of the potential downsides and risks from trading fractional shares.

Hard to Find

While investors can buy fractional shares, unfortunately traditional brokerage firms might not offer them for sale. Some brokerages may also place restrictions on selling fractional shares, since they have to be joined with other fractional shares to create a whole share in order to be sold.

Brokerage Fees

Then, those same institutions may charge a flat transaction fee to buy or sell a stock, no matter how few shares the investor plans to trade. Whether buying whole or fractional shares, trading fees and account fees can have an erosive effect on an investor’s returns.

That means that an investor would pay the trading commission whether they were buying a quarter of one share or 500 shares of a stock.

A fee of a few dollars to purchase a whole or fractional share may not seem like a lot, but it can be to an investor without much capital to get started. This is especially true if the investor is interested in building out a diversified portfolio, since buying fractional shares of 10 stocks could mean paying the fee 10 times.

How Different Institutions May Handle Fractional Shares

Each brokerage firm has a different strategy for handling partial shares, so it’s important to pay attention to the terms. For example, if you’re transferring your assets from one firm to another, and the new brokerage doesn’t accept fractional shares, you might have to sell your fractional shares — and incur certain expenses or capital gains taxes.

While some brokerage firms don’t allow the purchase of fractional shares, they may still end up in customer accounts for the following reasons:

•   Sometimes, brokerage firms have policies in place to pay out cash when a customer acquires a fractional share through a stock split.

•   Other brokerage firms may charge a higher transaction fee to sell partial shares received from dividend reinvestment, and may only allow shareholders to sell partial shares if they sell all their shares of that particular stock.

Pros and Cons of Fractional Shares

Pros

Cons

Lowers the barrier to entering the stock market for some investors. Fractional shares aren’t offered by all types of brokerages.
Gives investors more control over the amount of stock they want to own. Some brokerages may charge fees that can add up.
Can help increase diversification. Fractional share policies vary widely from brokerage to brokerage; investors should know the terms.

Where to Buy Fractional Shares

If you’re interested in purchasing fractional shares, you have a few options for doing so, starting with DRIPs. The problem, however, is that while some companies may offer DRIPs to new investors, it’s more common for this purchase option to be offered to existing shareholders only. If a company does offer a DRIP to new investors, the purchase typically has to be done through a third-party administrator.

Another option is to buy fractional shares using a mutual fund. Though a mutual fund is not a stock, it is a fund that holds many stocks. Some mutual funds effectively allow for the purchase of fractional shares, because some brokerage firms allow investors to purchase mutual funds using dollar amounts.

So, even if a mutual fund is trading for $79 per share, you could buy $1,000 worth of that fund, and effectively own 12 full shares plus 0.65 of that fund.

An investor could get started buying a fractional share of a mutual fund, and achieving diversification through owning the many stocks that are held in one fund.

Are ETF Fractional Shares Available for Purchase?

Yes, some brokers do offer fractional shares of exchange-traded funds, or ETFs. Given that ETFs are a low-cost way to buy into different market sectors, owning fractional ETF shares could offer another way to add diversification to your portfolio.

Returns From Fractional Shares

It’s worth repeating: The returns from fractional shares — whether gains or losses — are proportional to the fraction you own. If you own 0.33 of a stock, you would see a third of the gains (or a third of the losses), and a third the dividends, if it’s a dividend-paying stock.

You don’t have to wait until you own a full share to “qualify” for those stock returns. You see the same gains or losses as soon as you buy the fractional share.

Fractional Share Investing With SoFi

Because investors can now buy fractional shares at a fraction of the cost of full shares, doing so can help investors build a portfolio made of select stocks they wish to own, without being deterred by the share price.

That said, not all brokerages offer fractional shares. And because there are various ways brokerages might handle fractional shares that result from a stock split or a dividend reinvestment plan (DRIP), it’s important for investors to know the terms — and the inevitable costs.

If you’re eager to buy fractional shares — because it opens the door to owning some of your favorite companies — consider getting started with SoFi. You can open a self-directed brokerage account with SoFi Invest, and buy fractional shares at no additional cost.

SoFi’s secure platform that lets investors choose from an array of stocks, ETFs or fractional shares — as well as IPO shares, crypto, and more. For a limited time, funding an account gives you the opportunity to win up to $1,000 in the stock of your choice. All you have to do is open and fund a SoFi Invest account with $10 or more.

For a limited time, opening and funding an account gives you the opportunity to win up to $1,000 in the stock of your choice.

FAQ

Are there downsides to fractional shares?

Yes. Not all brokerages offer fractional shares, and new investors will want to consider all terms and fees for fractional shares at different firms.

Can you make money with fractional shares?

Yes. You reap the same returns with fractional shares that you do with full shares, proportional to the fraction you own. So if a stock has a 5% gain or loss, your fractional share would also gain (or lose) 5%.

When is it smart to invest in fractional shares?

If you want a lower cost way to own specific companies, or to build more diversification in your portfolio, you may want to consider investing in fractional shares.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Claw Promotion: Customer must fund their Active Invest account with at least $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected] Please read the prospectus carefully prior to investing. Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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Bitcoin (BTC) vs Waves (WAVES) Compared and Explained

Bitcoin vs Waves: The Differences and Similarities

As the world’s oldest form of crypto, Bitcoin is considered a store of value and a form of payment. Waves, a newer crypto, is more of a groundbreaker in the DeFi space.

Bitcoin was developed as an alternative to traditional currencies and financial channels. Waves, on the other hand, was created to allow users to launch their own applications and digital tokens. If you’re weighing whether to invest in Bitcoin vs. Waves, consider the advantages and disadvantages of each.

What Is Waves (WAVES)?

Waves is an open-source blockchain network that allows users to create and launch custom decentralized applications (dApps) and cryptocurrency tokens.

Blockchain technology processes information using “nodes”: decentralized networks of computers that can drive faster, more secure transactions. Decentralization is a key feature of the crypto realm, which is sometimes referred to as decentralized finance, or DeFi.

Waves works in a similar way to Ethereum, in that the Waves network is typically used to create products that require a high level of security — often relating to finance, personal identification, proprietary data, etc.

Waves has its own decentralized exchange, called DEX, and a native token, WAVES. The token works as a medium of exchange for network users, much like ETH on the Ethereum network.

How Does Waves Work?

Practically speaking, the Waves network is designed so that users with little or no crypto expertise can create digital tokens. All you have to do is fire up the Waves app or web platform and use the network’s token-creation system.

Waves offers users a different approach than similar blockchain networks in that tokens created on the network do not use advanced smart contracts, but rather scripts in user accounts. If you want to get technical, Waves uses a variation of the proof-of-stake consensus mechanism (called “leased” proof of stake) to verify data on the blockchain.

What Is Bitcoin and How Does It Work?

Bitcoin is a virtual currency. Launched in 2009 using blockchain technology, it’s the oldest and largest crypto asset on the market. Bitcoin balances and transaction records are maintained on a public blockchain ledger.

All Bitcoin records, transactions, and ownership data are maintained and verified by a large network of computers around the world through a proof-of-work consensus mechanism. (This is different from the proof-of-stake mechanism that Waves uses.) Through that mechanism, “miners” upkeep the network and are rewarded with Bitcoin.

Bitcoin holders can send each other Bitcoins, assuming they each have a special digital wallet or crypto wallet designed for that purpose, and a private key, which is an address where digital assets are stored.

Because Bitcoin is so popular, some businesses accept Bitcoin in exchange for goods and services — which is not the case for many other cryptocurrencies. In that sense, Bitcoin can be used as a literal currency in some situations.

💡 Recommended: Understanding the Different Types of Cryptocurrency

Comparing Bitcoin vs Waves

By now you may realize that Bitcoin and Waves are intrinsically different. Here are some ways in which the two are similar, and how they differ:

Similarities

The biggest commonality between Bitcoin and Waves is that both have been integral to the growth of the crypto market. Bitcoin was the trailblazer, and its immense growth in value over the past few years attracted attention from all over the investment sphere. But Waves’ ability to give folks with little know-how the tools to launch their own tokens is also generating buzz.

Differences

Bitcoin and Waves differ in key ways. Foremost, Bitcoin is a digital currency, while Waves is a platform for launching tokens. They’re two completely different things.

The two have different goals and aims, too. As noted above, Bitcoin was developed as an alternative to traditional currencies and financial channels. Waves was created to allow users to launch their own applications and digital tokens — even if they don’t know much about crypto.

On a technical level, the two exist on different blockchain networks and use smart contracts in different ways. Because it was designed as a currency, Bitcoin didn’t originally have smart contract functionality. Now, a separate blockchain network called Stacks enables smart contracts for Bitcoin. The Stacks blockchain uses the STX token as a “gas” asset to pay for executing smart contracts.

Smart contracts on the Waves blockchain feature scripts written in Ride, a domain-specific language for developing dApps focusing on security and ease of development. Due to built-in limitations, running Ride scripts doesn’t require any “gas” fees.

Finally, it’s worth pointing out that there is a huge disparity in value between Bitcoin and Waves’ token, WAVES. While Bitcoin has traded at prices exceeding $65,000 in the past, WAVES can be purchased for much less — typically between $4 and $30.

Bitcoin vs. Waves

Bitcoin

Waves

Built on blockchain technology and smart contracts
Integral to the growth of crypto
Functions as a platform
Functions as a virtual currency
Proof-of-stake mechanism
Proof-of-work mechanism

Buying Cryptocurrencies With SoFi

Bitcoin and Waves couldn’t be more different in functionality, underlying technology, and business goals. As the world’s oldest form of crypto, Bitcoin is considered a store of value and a form of payment. It was developed as an alternative to traditional currencies and financial channels.

Waves, on the other hand, was created to allow users to launch their own applications and digital tokens. Waves is more of a groundbreaker in the DeFi space, allowing entrepreneurs with minimal tech knowledge to create crypto products.

Waves and Bitcoin are just two of thousands of crypto assets out there with different and exciting aims, features, and functionality. Whether you’re interested in further exploring how cryptocurrency works, buying Bitcoin or another token, or investing in crypto-related stocks, you can get started using SoFi Invest.

It’s simple when you open an Active Invest account with SoFi Invest. It’s quick and easy, and soon you’ll be ready to trade dozens of different types of cryptocurrency. SoFi doesn’t offer staking or a crypto wallet, but you can trade online 24/7 using SoFi’s secure platform.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/22; terms apply.)

FAQ

Is Waves crypto legitimate and trustworthy?

Waves has been around since 2016, and its relative longevity in the crypto space is a good indicator of its legitimacy.

How safe is Waves crypto staking?

You can stake digital assets on Waves, which is one reason it attracts many users.

Who created and who owns Waves crypto?

Waves was founded by Sasha Ivanov in 2016, and the company is headquartered in Moscow. Since then, a parent company, Wave Labs, has been established in Miami, FL.


Photo credit: iStock/DjelicS

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount Bonus Payout
Low High
$50 $99.99 $10
$100 $499.99 $15
$500 $4,999.99 $50
$5,000+ $100

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