Your opinion on employee stock purchase programs

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jokershady
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10:17a, 5/15/23
AG
So I'm new to all of this...got awarded some RSU's last year that are still vesting and sounds like I'll be getting some more in the not to distant future....

Because of this, I read into our ESPP that was started not too long ago, and seemed like a pretty good deal and jumped into it for the first time (I believe this is only the second enrollment period so they haven't been doing it for long).

Curious to get y'alls opinions on them and on our specific one overall and how it compares to what others have seen in their respective companies....again....I'm a noob....

1 6-month offering period that takes a % of paycheck post taxes.....I picked 3%
2. offering period is from 6/1 - 11/30....can back out anytime and get 100% of all monies taken from check up to 10 days prior to offering period ending
3. get lowest stock price on either date of 6/1 or 11/30
4. whichever stock price is used get an additional 10% off that price
5. stock is fully owned upon purchase and no vesting period

this has been enough to get me interested in looking up info online...finding some books...etc but for this ESPP specifically i'm assuming there's gonna be folks on here that have experience with this....

think that just about covers it....y'alls thoughts?
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JobSecurity
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10:38a, 5/15/23
AG
max it out, sell immediately upon vesting. unless you think you can get a guaranteed risk free minimum 10% return elsewhere
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deadbq03
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10:51a, 5/15/23
AG
My thought process is to avoid exposure to the company I work for. I'm probably risk-averse, but if the company hits hard times and I lose my job, I don't want to also have the double-whammy of losing a sizable chunk of my investments.

If you do it, I agree with the above - sell as soon as you're vested to limit your exposure. Or more specifically, you probably need to transfer to your own brokerage and then sell if the brokerage your company uses has transaction fees… and it likely does because they prey on folks who don't know how the stock market works. Worst I saw was Computershare's handling of SWN stock… it's dang-near criminal to charge fixed per-share transaction fees when share prices are that that low. Transfers were free, but those turds took a sizable cut from folks who didn't know better and just sold directly.
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Sooner Born
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11:27a, 5/15/23
ESPP is a no brainer. Max out your contributions and sell on the day that it funds/vests.

There is virtually no exposure and a tremendous amount of upside.

Literally, the only thing that could go wrong is a plummet of the stock price in the moments between the vesting price and when it's available for sale.

Anyone who says any different doesn't know what they are talking about.
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jokershady
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11:37a, 5/15/23
AG
appreciate the quick responses!

the good thing about our ESPP is that there is no vesting period so i'll own 100% of the stock right after it's purchased on november 30th (or whenever it's actually purchased if it takes a day or two.....no idea)....

the max we can contribute is 15% of our check but not sure i can afford that currently.....would need to make adjustments to be able to do that on the next 6-month go 'round.....

would the tax implications on selling a stock that you had just bought be any reason to hold on to it? i know you get hit with less tax if you wait a year as opposed to right selling right away, but maybe that difference doesn't compare to the money you'd still earn....

the other thing is i currently don't have any other real investments as this is me just getting my feet wet....

but if the tax implications are meaningless in the grand scheme and if it makes more sense to sell right away after purchasing due to the lowered price + discount then it sounds like that's what i'll do.....
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topher06
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In reply to jokershady • 11:43a, 5/15/23
Guessing you can get a lower tax rate if you wait a year, but regardless of ability to wait you should be trying to get 15% of your check into that account and then sell anything you don't want to hold long term immediately. You have to expect this is at least a 10% gain (and would be more if the 6/1 price was the lower price).
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Diggity
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In reply to jokershady • 12:33p, 5/15/23
AG
jokershady said:
So I'm new to all of this...got awarded some RSU's last year that are still vesting and sounds like I'll be getting some more in the not to distant future....

Because of this, I read into our ESPP that was started not too long ago, and seemed like a pretty good deal and jumped into it for the first time (I believe this is only the second enrollment period so they haven't been doing it for long).

Curious to get y'alls opinions on them and on our specific one overall and how it compares to what others have seen in their respective companies....again....I'm a noob....

1 6-month offering period that takes a % of paycheck post taxes.....I picked 3%
2. offering period is from 6/1 - 11/30....can back out anytime and get 100% of all monies taken from check up to 10 days prior to offering period ending
3. get lowest stock price on either date of 6/1 or 11/30
4. whichever stock price is used get an additional 10% off that price
5. stock is fully owned upon purchase and no vesting period

this has been enough to get me interested in looking up info online...finding some books...etc but for this ESPP specifically i'm assuming there's gonna be folks on here that have experience with this....

think that just about covers it....y'alls thoughts?
no books needed. Just follow JobSecurity's advice
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BlackGoldAg2011
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1:24p, 5/15/23
AG
the only two pitfalls i'd check for that could add risk to the "no risk 10% yield" would be
  • make sure your company doesn't have black out periods for employees trading in company stock. If so, the timing could potentially limit your ability to sell right away
  • ask some coworkers who have participated in the past how long between vesting and the stock actually showing up in your account for you to begin trading. My company does RSU grants, and for some reason, even though my shares vest on 4/1, and the company utilized fidelity and my brokerage is fidelity, it usually takes close to 2 full weeks from vesting for my shares to actually show up in my account.

both of these have to potential to expose you to a bit of market timing risk. while it would be small risk and short timings, just make sure you go in fully understanding all your potential risks
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Ogre09
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1:34p, 5/15/23
AG
My company used to allow us to do lump sum purchases, up to 10% of salary. I'd buy max every year and flip it right away. It was great, cash was tied up for just a couple weeks for usually a 15-25% instant gain.

Then a few years ago they switched to payroll deduction only, spread out over 6 months. If you bought in 10% of your annual, you would get docked 20% for half the year. That was too big of a hit for me, so I haven't opted in since.
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htxag09
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2:18p, 5/15/23
AG
We do the max for my wife, 10%. We sell it quarterly simply because the platform her company uses charges a fee, so we wanted to spread the fee out a little more.
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fire09
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2:52p, 5/15/23
AG
Didn't read everything but make sure there isn't a required holding period for the stock prior to sale. Most espp have this requirement. If there is, that's not a guarantee you will make 10%
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Sea Speed
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In reply to fire09 • 6:45p, 5/15/23
AG
fire09 said:
Didn't read everything but make sure there isn't a required holding period for the stock prior to sale. Most espp have this requirement. If there is, that's not a guarantee you will make 10%


This. I hit a scenario where the stock went down between the purchase date and when the stocks hit my account. Took a loss. Not good, Bob.
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Aglaw97
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7:35p, 5/15/23
AG
That plan sounds typical of most. Lots of companies going away from these. Assuming no holding period and assuming you aren't someone subject to company blackouts, I'd do it. Set limits to sell so at a minimum you make some profit as a result of buying at the look back discount
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aggie_wes
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8:22p, 5/15/23
AG
Just going to say, I put a lot into ESPP at a former employer. Company was doing well when I started, not so much when I left. Long story, that is by far my biggest $$ investment loss. Even by the time I was able to sell (was usually about 10 days after the closing period before shares were available to sell) I had lost money.

I would say do it, but sell immediately and reinvest into something else. You may make 10%, you may lose a few %, but you won't lose as much I did
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$30,000 Millionaire
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8:35p, 5/15/23
AG
Free money, man. You can't lose.
You don’t trade for money, you trade for freedom.
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Sooner Born
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In reply to Sea Speed • 10:41p, 5/15/23
Sea Speed said:
fire09 said:
Didn't read everything but make sure there isn't a required holding period for the stock prior to sale. Most espp have this requirement. If there is, that's not a guarantee you will make 10%


This. I hit a scenario where the stock went down between the purchase date and when the stocks hit my account. Took a loss. Not good, Bob.
One time or every time?
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Sea Speed
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In reply to Sooner Born • 10:46p, 5/15/23
AG
I cant recall how frequently but the company was on a downward trajectory when i was there and ended the espp towards the end of my employment. Just something to be wary of, I maxed mine out because it is truly a no brainer to take advantage of. Just sharing an anecdote.
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fire09
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12:39a, 5/16/23
AG
My last espp purchase. 6 month high 52.11, low 38.55. Bought at 34.70. Sold 6 months later the second I could at 29.50. Current stock price is around 19. It's not free money unless you can sell immediately.
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OldArmyCT
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5:08a, 5/16/23
AG
Depends on the company and what you think of its future. I worked for BoA for 28 years, had a ton of BAC when I retired, a small amount was under water, almost enough to negate the gains and I bought a house with it and the proceeds from the previous house. Got the awards anywhere from $52 to $3. I got lucky, but it worked.
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DannyDuberstein
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7:34a, 5/16/23
AG
Sell RSU's as soon as they vest. Participate in the ESPP as long as there is a discount and the company (or industry) isn't having issues, but also sell as soon as they vest

The only company stock awards that make sense to hold past initial vesting date are options
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Petrino1
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In reply to fire09 • 9:23a, 5/16/23
fire09 said:
Didn't read everything but make sure there isn't a required holding period for the stock prior to sale. Most espp have this requirement. If there is, that's not a guarantee you will make 10%
This, Im surprised at everyone saying its a guaranteed 10% return. Most of the ESPP's I've seen had a 1 year holding period before you could sell.
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Big Baccala
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9:23a, 5/16/23
AG
Just a reminder, there is a tax impact in the year that RSUs vest. Your company will report the income in your W2.
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htxag09
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9:37a, 5/16/23
AG
It's a stock, just like any investment, of course there is a risk.

Read and understand the rules around it.

My wife has a 15% discount. Automatically taken out of her check and purchased when she's paid. In her account and hers to do whatever she wants with within a couple days, including selling. She isn't privy to any information that requires her to be in blackout periods. The platform her company uses charges a fee, like $50, per transaction. So we hold and sell on the first of every quarter to split the fee up. Her stock has gone up, her stock has gone down. We're still way "ahead".

At the end of the day, it's just another investment, but at a discount. If you could buy a stock at a 10, 15, 20% discount, would you? If the outlook of that stock is so bleak to you that the answer is no, should you really be working there?
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Win At Life
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In reply to $30,000 Millionaire • 11:33a, 5/16/23
AG
$30,000 Millionaire said:
Free money, man. You can't lose.
I lost money in Enron's ESPP.
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Gordon McKernan
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12:10p, 5/16/23
I am an "insider" at my company & subject to blackout periods. Our blackout periods typically start 2 weeks before qtr-end and opens back up a few days after our earnings call (so usually I am locked out for 45-60 days each quarter).

I've received multiple RSU grants and also participate in our ESPP program (ours is 15% discount off lower price of enrollment open/close - no holding period). The IRS limits for ESPP are 15% of salary up to a maximum of $25,000/yr.

An ESPP has risk if there is a holding period, but the OP stated there is no holding period in his plan. If he has ample cash flow/savings to be able to survive the initial 6-mo. timeframe of reduced take-home pay, & divert the max into his ESPP, he 100% should. Once the 6-mo. window closes & the shares hit his brokerage he can then sell & recover his costs + his automatic 11.1% return (assume stock price of 100, he buys it at 90, sells at 100.... 100/90-1=11.1%), before taxes.

I would also be surprised if the ESPP stock at the end of your 6-mo. window was made available during an insider blackout period. I know at my company all of our ESPP windows & RSU grants are designed so they become available during an open window.

With an ESPP, in my opinion there is risk only if you decide, or are required, to hold.
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Diggity
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2:12p, 5/16/23
AG
I wasn't aware so many folks had holding periods. Mine can be sold as soon as it is purchased.

My dad lost his ass with Enron ESOP, so I always sell pretty quickly (and load up on WWR)

Murphy's Law in place, as my shares would be up roughly 150% if I had held,
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CapCity12thMan
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2:35p, 5/16/23
AG
fortunate to have ESPP for over 15 years and 2022 were the only purchase periods that are higher than the current price. Bought and held has paid off. Wish for 3 quarters out of 60 we had sold immediately. #stillwayahead
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fire09
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In reply to Gordon McKernan • 5:04p, 5/16/23
AG
Where did the OP state there was no holding period? Vesting vs holding period are two distinct things, no?

Edit: nevermind I saw followup post. But curious in general for the finance guys to answer my question above.
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$30,000 Millionaire
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In reply to Win At Life • 8:46p, 5/16/23
AG
Win At Life said:
$30,000 Millionaire said:
Free money, man. You can't lose.
I lost money in Enron's ESPP.


1 out of thousands
You don’t trade for money, you trade for freedom.
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YouBet
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9:59p, 5/16/23
AG
Ours was a 10% discount. No holding period. No vesting. I never really took advantage of it but I scored well on RSUs in last half of career so never really cry over it.

Oh well.
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jh0400
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6:14a, 5/17/23
AG
There should be no lockup on shares purchased through an ESPP outside of standard blackouts for named insiders. On the insider front, I'm pretty sure my company's ESPP settles in January and July which are both closed for insiders. We recently changed our RSU vesting for prospective grants, because for a while we had vesting on 1/2 which led to a month of blackout for anyone on the insider list.
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YouBet
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In reply to jh0400 • 8:09a, 5/17/23
AG
jh0400 said:
There should be no lockup on shares purchased through an ESPP outside of standard blackouts for named insiders. On the insider front, I'm pretty sure my company's ESPP settles in January and July which are both closed for insiders. We recently changed our RSU vesting for prospective grants, because for a while we had vesting on 1/2 which led to a month of blackout for anyone on the insider list.
Yeah, I'm confused by this thread. Never heard of this and seems to be alot of examples of it on here. I'm wondering if people are conflating RSU's with ESPP.
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deddog
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In reply to Sooner Born • 10:18p, 5/17/23
AG
Sooner Born said:
ESPP is a no brainer. Max out your contributions and sell on the day that it funds/vests.

There is virtually no exposure and a tremendous amount of upside.

Literally, the only thing that could go wrong is a plummet of the stock price in the moments between the vesting price and when it's available for sale.

Anyone who says any different doesn't know what they are talking about.


This. Absolutely this.
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