I am in a position in which I am awarded several stock incentives for my compensation.

I receive Stock Appreciation Rights, Restricted Stock Units, and Preferred Stock.

They recently rolled out a ESPP, which comes with a 15% discount off of the lower of the price from start and end of each quarter.

I have accumulated a lot of shares, is there a play here where I sell some of my current shares, and use that money to buy mew shares at the 15% discount price? There is a limit to how much I can buy, but it seems like a no lose situation.

Example:
I have $100,000 of value in SAR's. This value fluctuates with the market.

I would sell $24,000, and buy the exact same stock at a 15% discount, $6,000 every quarter. No matter what that stock does, I would have to be in a better position than just holding the SAR's right? (Besides the long term gain realized on the stock sale). This seems like free money if I was not planning on exercising my SAR's or RSU's?

Am I missing the downside? (besides diversification perhaps)

Correct, is % of my paycheck and purchased at end of qtr. I would sell the equivalent share of stock when it is purchased

i don't know that the source of the funds makes much difference. The arbitrage is the same.

It would prevent you from further concentration risk of course.

I don't know if there's a better tax strategy for those RSU's.

its 100% for diversification

You get to the same place by buying shares through the ESPP and then immediately selling them as you would selling your existing shares to roll down your basis ex tax impact.

Also, lots of plans limit the amount you are able to purchase through an ESPP. They aren't designed for people who have a large portion of their comp in equity.

jh0400 said:

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You get to the same place by buying shares through the ESPP and then immediately selling them as you would selling your existing shares to roll down your basis ex tax impact.

Also, lots of plans limit the amount you are able to purchase through an ESPP. They aren't designed for people who have a large portion of their comp in equity.

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It's limited to 5% of your salary. But at a 15% discount its almost $2,500 of free money. I would sell off RSU and SARs since they are long term in year one while ESPP would be short term. After 12 months I would just sell off the tranche of long term ESPP quarterly.

The risk is the stock falls over 12 months but still would be positive in most cases or I could hold a little longer. I dont need the money but want to maximize the offering.

TXAGGIES said:

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I am in a position in which I am awarded several stock incentives for my compensation.

I receive Stock Appreciation Rights, Restricted Stock Units, and Preferred Stock.

They recently rolled out a ESPP, which comes with a 15% discount off of the lower of the price from start and end of each quarter.

I have accumulated a lot of shares, is there a play here where I sell some of my current shares, and use that money to buy mew shares at the 15% discount price? There is a limit to how much I can buy, but it seems like a no lose situation.

Example:
I have $100,000 of value in SAR's. This value fluctuates with the market.

I would sell $24,000, and buy the exact same stock at a 15% discount, $6,000 every quarter. No matter what that stock does, I would have to be in a better position than just holding the SAR's right? (Besides the long term gain realized on the stock sale). This seems like free money if I was not planning on exercising my SAR's or RSU's?

Am I missing the downside? (besides diversification perhaps)

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Do you work for a Texas based energy company with sites in Cali and northern part of the US?

TXAGGIES said:

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jh0400 said:

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You get to the same place by buying shares through the ESPP and then immediately selling them as you would selling your existing shares to roll down your basis ex tax impact.

Also, lots of plans limit the amount you are able to purchase through an ESPP. They aren't designed for people who have a large portion of their comp in equity.

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It's limited to 5% of your salary. But at a 15% discount its almost $2,500 of free money. I would sell off RSU and SARs since they are long term in year one while ESPP would be short term. After 12 months I would just sell off the tranche of long term ESPP quarterly.

The risk is the stock falls over 12 months but still would be positive in most cases or I could hold a little longer. I dont need the money but want to maximize the offering.

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The maximum IRS contribution for a qualified ESPP is $25,000 worth of stock per calendar year, based on the fair market value (FMV) of the stock on the offering grant date. This limit applies to the value of the shares purchased, not the cash contributed, and often results in an effective maximum contribution of $21,250.

I did this every quarter when I was at Baker Hughes. No downside and guaranteed to make if you sell it as soon as it's awarded to you.

RSU awarding and vesting dates are rarely the same.I was retired for 3 years before having access to all my bonus stock.

OldArmyCT said:

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RSU awarding and vesting dates are rarely the same.I was retired for 3 years before having access to all my bonus stock.

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Correct.

Exceptions are if the company gets acquired for example. But usually seen a 1 to 3 year vesting period.

deddog said:

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OldArmyCT said:

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RSU awarding and vesting dates are rarely the same.I was retired for 3 years before having access to all my bonus stock.

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Correct.

Exceptions are if the company gets acquired for example. But usually seen a 1 to 3 year vesting period.

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Correct, they vest in 3 years, but once you have been in a role for more than 3 years you get a vesting annually of the 3 year old share.

deddog said:

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OldArmyCT said:

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RSU awarding and vesting dates are rarely the same.I was retired for 3 years before having access to all my bonus stock.

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Correct.

Exceptions are if the company gets acquired for example. But usually seen a 1 to 3 year vesting period.

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An acquisition doesn't necessarily mean that they will immediately vest. Sometimes they convert to a cash equivalent that pays out at the transaction price over the original vesting schedule.

I would want to be crystal clear on the tax implications of what you're considering. It sounds like you'd be triggering some taxable events, as well as potentially market risk if you're required to hold the ESPP shares for a longer period of time than the other incentive buckets.