ESPP shares tank before I can sell

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mbasherp
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ESPP shares tank before I can sell

Post by mbasherp » Wed Mar 06, 2019 4:48 pm

This is my third go-around with my quarterly Employee Stock Purchase Plan. It involves a 10% discount on the day of purchase. Today, one week after the purchase, is the first day the shares officially appear in my account. Coincidentally, the stock is down nearly 5% today on no news at all. The shares are down 8% since my purchase a week ago. Again, no news.

This has happened all 3 times so far that I've had ESPP shares purchased. Am I being unreasonable to say that this is ridiculous? Is it theoretically possible that I'm systematically being beaten to the punch by other sellers who are causing the price to drop before I can sell mine? I only participated in the plan to pocket the 10% discount as additional compensation and then roll the proceeds into my taxable account. Being down 8%, by the time I pay the outlandish broker's fee to sell and transfer, I'll have lost money even INCLUDING the discount.

I'm wondering if this ESPP program is worth it at all, or if I'm just becoming the sucker for someone else in terms of my employer's stock. :annoyed

Edited to add: this is a widely traded Megacorp, not some tiny micro cap that should get pushed around so easily by a couple employees selling recent ESPP shares.

Dottie57
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Re: ESPP shares tank before I can sell

Post by Dottie57 » Wed Mar 06, 2019 4:54 pm

I had my ESPP shares tank by 50% for over 5 years. I kept them. I wish I had sold them and put the cash into a Roth IRA.

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Wiggums
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Re: ESPP shares tank before I can sell

Post by Wiggums » Wed Mar 06, 2019 4:58 pm

mbasherp wrote:
Wed Mar 06, 2019 4:48 pm
This is my third go-around with my quarterly Employee Stock Purchase Plan. It involves a 10% discount on the day of purchase. Today, one week after the purchase, is the first day the shares officially appear in my account. Coincidentally, the stock is down nearly 5% today on no news at all. The shares are down 8% since my purchase a week ago. Again, no news.

This has happened all 3 times so far that I've had ESPP shares purchased. Am I being unreasonable to say that this is ridiculous? Is it theoretically possible that I'm systematically being beaten to the punch by other sellers who are causing the price to drop before I can sell mine? I only participated in the plan to pocket the 10% discount as additional compensation and then roll the proceeds into my taxable account. Being down 8%, by the time I pay the outlandish broker's fee to sell and transfer, I'll have lost money even INCLUDING the discount.

I'm wondering if this ESPP program is worth it at all, or if I'm just becoming the sucker for someone else in terms of my employer's stock. :annoyed
I said this in another posting, but I don’t think it was you. Since my paycheck and stock comes from the same place, I do not hold the company stock. The ten percent discount is nice, but this won’t be the last time you are faced with this issue. I’m assuming that this stock is very volatile and can even stay down. Given your anxiety since you don’t really want to hold it, i would pass on the espp. Also, i would not sell it at a loss, but I’m the guy that held a mutual fund for over ten years after it tanked on me.
Last edited by Wiggums on Wed Mar 06, 2019 5:11 pm, edited 3 times in total.

retiringwhen
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Re: ESPP shares tank before I can sell

Post by retiringwhen » Wed Mar 06, 2019 5:02 pm

Let me ask, would you buy the stock without the 10% discount in your regular brokerage account? If not, why are you doing it now?

I went through this decision process and sold ALL my slightly MegaCorp stock years ago. It has done well since then, but I take enough risk with staying employed with them that I don't need anymore risk from them via an ESPP. Same with options or RSU's that I have received.

lucky_tech_guy
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Re: ESPP shares tank before I can sell

Post by lucky_tech_guy » Wed Mar 06, 2019 5:05 pm

Sounds unlucky. If you're consistently selling at a loss then probably not worth keeping.

Interesting to see differences in ESPP plans. We can sell the next day (if we're not in a blackout period). And our buy price is the lower of the price - 15% on grant date, or the previous 2 grant dates.

I've made a killing in ESPP, but I'm also an idiot and have something like 80% of my net worth in options and rsus at my company.

28fe6
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Re: ESPP shares tank before I can sell

Post by 28fe6 » Wed Mar 06, 2019 5:11 pm

In my old ESPP, we could sell the same day we got the shares. So the worst that could happen is however the stock could fall in 1 day. Even when it did fall, it was by less than my 15% discount amount, so it was pretty low-risk if you sold right away. However, one period the administrators messed something up and it took a couple days for the shares to appear in our accounts before we could sell them. Since the stock happened to be going down (I'm SURE it was an honest mistake and just a coincidence that the "mistake" happened while the stock was tanking), we weren't very happy. I still don't think we lost the full 15%, though.

With a discount of only 10% and a week of waiting before shares can be sold, I would be thinking hard about whether your ESPP is worth it

barnaclebob
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Re: ESPP shares tank before I can sell

Post by barnaclebob » Wed Mar 06, 2019 5:12 pm

Does this mean your company stock is way down if you have done this 3 times or does it rebound after several weeks?

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mbasherp
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Re: ESPP shares tank before I can sell

Post by mbasherp » Wed Mar 06, 2019 5:25 pm

retiringwhen wrote:
Wed Mar 06, 2019 5:02 pm
Let me ask, would you buy the stock without the 10% discount in your regular brokerage account? If not, why are you doing it now?
No. I'm participating now because it is equivalent to giving myself a 1.5% pay raise. (Can put 15% of salary toward stock at a 10% discount.) I am not accumulating shares, I am selling immediately to pocket the money and move it all into my index funds. I dislike the week delay between purchase and when it appears in an account to sell, but the stock should not always be moving materially during a 5-7 day window. However it is, and 3/3 times it has been to my detriment.

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mbasherp
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Re: ESPP shares tank before I can sell

Post by mbasherp » Wed Mar 06, 2019 5:27 pm

barnaclebob wrote:
Wed Mar 06, 2019 5:12 pm
Does this mean your company stock is way down if you have done this 3 times or does it rebound after several weeks?
It has rebounded each time, but keep in mind I'm new to participating or watching the company's stock price. Overall, the stock is doing great on a multi-year basis.

The issue here is that I have no interest in accumulating shares in my employer over the medium or long term, due to the concentrated risk. If I hold these shares now until it "comes back," I'm really changing the rules of my own game.

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GoldStar
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Re: ESPP shares tank before I can sell

Post by GoldStar » Wed Mar 06, 2019 5:27 pm

We have different definitions of tanking.
8% isn't tanking in my book.
50 to 75% would be tanking.

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mbasherp
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Re: ESPP shares tank before I can sell

Post by mbasherp » Wed Mar 06, 2019 5:36 pm

GoldStar wrote:
Wed Mar 06, 2019 5:27 pm
We have different definitions of tanking.
8% isn't tanking in my book.
50 to 75% would be tanking.
8% on no news over 1 week, right when employees get their shares? That's tanking. We aren't talking a long holding period here. Market movements should be mere noise, over even my small sample size.

barnaclebob
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Re: ESPP shares tank before I can sell

Post by barnaclebob » Wed Mar 06, 2019 5:37 pm

mbasherp wrote:
Wed Mar 06, 2019 5:27 pm
barnaclebob wrote:
Wed Mar 06, 2019 5:12 pm
Does this mean your company stock is way down if you have done this 3 times or does it rebound after several weeks?
It has rebounded each time, but keep in mind I'm new to participating or watching the company's stock price. Overall, the stock is doing great on a multi-year basis.

The issue here is that I have no interest in accumulating shares in my employer over the medium or long term, due to the concentrated risk. If I hold these shares now until it "comes back," I'm really changing the rules of my own game.
Sound like you either need to let the law of large numbers start bringing you closer to the 10% nominal or change the rules to something like "I can hold the stock for up to 8 weeks after I can sell it to try to get back to "even".

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mbasherp
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Re: ESPP shares tank before I can sell

Post by mbasherp » Wed Mar 06, 2019 5:40 pm

barnaclebob wrote:
Wed Mar 06, 2019 5:37 pm

Sound like you either need to let the law of large numbers start bringing you closer to the 10% nominal or change the rules to something like "I can hold the stock for up to 8 weeks after I can sell it to try to get back to "even".
I'm inclined to agree, but I'm bothered enough to post on a public forum and wonder aloud about whether there could be a fix going on.

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BL
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Re: ESPP shares tank before I can sell

Post by BL » Wed Mar 06, 2019 5:41 pm

What exactly are the fees involved with the broker? If close to discount, then why bother?

barnaclebob
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Re: ESPP shares tank before I can sell

Post by barnaclebob » Wed Mar 06, 2019 5:41 pm

mbasherp wrote:
Wed Mar 06, 2019 5:40 pm
barnaclebob wrote:
Wed Mar 06, 2019 5:37 pm

Sound like you either need to let the law of large numbers start bringing you closer to the 10% nominal or change the rules to something like "I can hold the stock for up to 8 weeks after I can sell it to try to get back to "even".
I'm inclined to agree, but I'm bothered enough to post on a public forum and wonder aloud about whether there could be a fix going on.
Likely not with a large publicly traded company. These shares should be in the noise and if there was a real pattern the computers would have taken advantage of it by now.

retiringwhen
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Re: ESPP shares tank before I can sell

Post by retiringwhen » Wed Mar 06, 2019 5:46 pm

mbasherp wrote:
Wed Mar 06, 2019 5:40 pm
barnaclebob wrote:
Wed Mar 06, 2019 5:37 pm

Sound like you either need to let the law of large numbers start bringing you closer to the 10% nominal or change the rules to something like "I can hold the stock for up to 8 weeks after I can sell it to try to get back to "even".
I'm inclined to agree, but I'm bothered enough to post on a public forum and wonder aloud about whether there could be a fix going on.
Read Dark Pools or one of the day trading books. It is likely that someone has figured out how to front run all the MegaCorp folks who are "sure to turn a short-term profit" on ESPP shares. You just figured it out, YOU are the sucker. The ESPP plan is public info, any well armed trader can figure this out (including the market makers) and work hard to arbitrage away that 10% bonus you were looking for.

If your company is big enough, it might be pretty lucrative.

BTW, my company's ESPP has a 2 year waiting period which effectively removes this problem. Folks aren't going to schedule the sale on day 731, they may have LTCG to consider!

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mbasherp
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Re: ESPP shares tank before I can sell

Post by mbasherp » Wed Mar 06, 2019 5:49 pm

BL wrote:
Wed Mar 06, 2019 5:41 pm
What exactly are the fees involved with the broker? If close to discount, then why bother?
$35 in broker fees. Essentially each quarter I'm getting a couple thousand in stock, with a couple hundred dollars worth of discount. Theoretically, even with the stock marginally down and this steep broker fee, participating is better than not participating.

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mbasherp
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Re: ESPP shares tank before I can sell

Post by mbasherp » Wed Mar 06, 2019 5:54 pm

retiringwhen wrote:
Wed Mar 06, 2019 5:46 pm

Read Dark Pools or one of the day trading books. It is likely that someone has figured out how to front run all the MegaCorp folks who are "sure to turn a short-term profit" on ESPP shares. You just figured it out, YOU are the sucker. The ESPP plan is public info, any well armed trader can figure this out (including the market makers) and work hard to arbitrage away that 10% bonus you were looking for.
This is fascinating and entirely plausible. If this is happening, my choice becomes:

1) Don't participate.

2) Be willing to hold the shares until they rebound from these shenanigans. Changes my risk profile, but all options are on the table.

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JoeRetire
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Re: ESPP shares tank before I can sell

Post by JoeRetire » Wed Mar 06, 2019 6:08 pm

mbasherp wrote:
Wed Mar 06, 2019 4:48 pm
Am I being unreasonable to say that this is ridiculous? Is it theoretically possible that I'm systematically being beaten to the punch by other sellers who are causing the price to drop before I can sell mine? I only participated in the plan to pocket the 10% discount as additional compensation and then roll the proceeds into my taxable account. Being down 8%, by the time I pay the outlandish broker's fee to sell and transfer, I'll have lost money even INCLUDING the discount.

I'm wondering if this ESPP program is worth it at all, or if I'm just becoming the sucker for someone else in terms of my employer's stock. :annoyed
You think someone is singling you out and somehow driving your stock price down to deny you ESPP proceeds?

Reminder: Stocks can go up, but they can go down, too. No voodoo required.
Very Stable Genius

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mbasherp
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Re: ESPP shares tank before I can sell

Post by mbasherp » Wed Mar 06, 2019 6:14 pm

JoeRetire wrote:
Wed Mar 06, 2019 6:08 pm

You think someone is singling you out and somehow driving your stock price down to deny you ESPP proceeds?

Reminder: Stocks can go up, but they can go down, too. No voodoo required.
Certainly not singling me out. But retiringwhen very clearly illustrated that it is possible for ESPP participants to be suckers in this scenario. I'd even say likely, given my knowledge of the trading markets. I'm honestly embarrassed that I hadn't thought of it.

retiringwhen
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Re: ESPP shares tank before I can sell

Post by retiringwhen » Wed Mar 06, 2019 6:29 pm

mbasherp wrote:
Wed Mar 06, 2019 5:54 pm
retiringwhen wrote:
Wed Mar 06, 2019 5:46 pm

Read Dark Pools or one of the day trading books. It is likely that someone has figured out how to front run all the MegaCorp folks who are "sure to turn a short-term profit" on ESPP shares. You just figured it out, YOU are the sucker. The ESPP plan is public info, any well armed trader can figure this out (including the market makers) and work hard to arbitrage away that 10% bonus you were looking for.
This is fascinating and entirely plausible. If this is happening, my choice becomes:

1) Don't participate.

2) Be willing to hold the shares until they rebound from these shenanigans. Changes my risk profile, but all options are on the table.
Bing, you get it, you win! :sharebeer

curmudgeon
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Re: ESPP shares tank before I can sell

Post by curmudgeon » Wed Mar 06, 2019 6:41 pm

I've seen that before when I worked at a mid-size megacorp. If you have a specific day with a lot of extra selling pressure from ESOP, it doesn't even have to be market makers playing games. I generally waited a week or two to sell, but if the market in general (or the specific stock) takes a longer term downswing, you can lose some.

Lockup expirations can have similar issues, but sometimes the market makers will step in to treat that as a special case and smooth things out.

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mmmodem
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Re: ESPP shares tank before I can sell

Post by mmmodem » Wed Mar 06, 2019 6:47 pm

mbasherp wrote:
Wed Mar 06, 2019 5:49 pm
$35 in broker fees. Essentially each quarter I'm getting a couple thousand in stock, with a couple hundred dollars worth of discount. Theoretically, even with the stock marginally down and this steep broker fee, participating is better than not participating.
I stopped participating in my ESPP when I realized I was only making a couple hundred dollars after tax. This is not worth the risk. My company stock also seems to drop immediately after an ESPP event. Yes, theoretically participating is better than not participating but the risk does not equal reward. Twice a year I would be nervous waiting for that exact moment that I would be allowed to sell. That's too much aggravation for $400 a year.

dcw213
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Re: ESPP shares tank before I can sell

Post by dcw213 » Wed Mar 06, 2019 6:54 pm

This is an interesting post and a topic I have pondered passively for some time. My first job was with a mid cap public firm. We had a 15% discount on the ESPP. Even before I was financially savvy it was clear to me that this was free money to be had. I maxed out and sold immediately for the first couple of years. We only had a one day lag between purchase and liquidity. It worked out well for me but I did notice that during that one day period there was ALWAYS a substantial decline in the value of the shares. I would guess I netted about 11% rather than the 15% discount (still good of course, but a material difference).

I did not discuss this with anyone as it was clear that immediately selling was "frowned upon" by management (this place was a joke). Interestingly, in 2008 they changed terms to require a one year holding period to make sure it was more incentive based. I stopped participating at this point.

In the grand scheme I didnt spend much time dwelling on this but I did always wonder if there were pros on the other end of those trades capitalizing off the herd.

inbox788
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Re: ESPP shares tank before I can sell

Post by inbox788 » Wed Mar 06, 2019 11:54 pm

mbasherp wrote:
Wed Mar 06, 2019 4:48 pm
This is my third go-around with my quarterly Employee Stock Purchase Plan. It involves a 10% discount on the day of purchase. Today, one week after the purchase, is the first day the shares officially appear in my account. Coincidentally, the stock is down nearly 5% today on no news at all. The shares are down 8% since my purchase a week ago. Again, no news.

This has happened all 3 times so far that I've had ESPP shares purchased. Am I being unreasonable to say that this is ridiculous? Is it theoretically possible that I'm systematically being beaten to the punch by other sellers who are causing the price to drop before I can sell mine? I only participated in the plan to pocket the 10% discount as additional compensation and then roll the proceeds into my taxable account. Being down 8%, by the time I pay the outlandish broker's fee to sell and transfer, I'll have lost money even INCLUDING the discount.

I'm wondering if this ESPP program is worth it at all, or if I'm just becoming the sucker for someone else in terms of my employer's stock. :annoyed

Edited to add: this is a widely traded Megacorp, not some tiny micro cap that should get pushed around so easily by a couple employees selling recent ESPP shares.
What's the longer record? Is this a downtrend for the last 12 months and longer or just a few days even and it bounces back? Does it coincide with any particular time of the month or other recurring event? What's the correlation with the market? December was a down month. Sept 10 was the bottom of the market. Last week the market was relative flat.

I wouldn't conclude much from these 3 data points. In a trending up market you could just as easily have gone up 8% above your 10% discount. You win some, you lose some, but you get all the shares at a 10% discount, so you should expect a 10% gain above the market or what the stock does in the long run. If you really think someone is moving the market right as your shares are released, maybe you can always sell 2-3 weeks after.

aspiringboglehead
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Re: ESPP shares tank before I can sell

Post by aspiringboglehead » Thu Mar 07, 2019 2:19 pm

mbasherp wrote:
Wed Mar 06, 2019 5:54 pm
This is fascinating and entirely plausible. If this is happening, my choice becomes:

1) Don't participate.

2) Be willing to hold the shares until they rebound from these shenanigans. Changes my risk profile, but all options are on the table.
There is a third choice, which is to participate but to hedge your exposure to falls in the stock price using options. (You could simply purchase a put option, for example.) You may find that that "insurance" isn't worthwhile, but with a 10% discount on the market price of the stock, it may well be.

For what it's worth, I personally doubt, based on a sample size of three, that it's anything nefarious. It would be hard to exploit this, in part because if it were regularly exploited, people could see that it would be regularly exploited and exploit the exploiters (by doing the same thing to them that they're doing to you). It's certainly possible, but I wouldn't consider it likely just from the evidence presented here.

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Quirkz
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Re: ESPP shares tank before I can sell

Post by Quirkz » Thu Mar 07, 2019 5:49 pm

I know you said you're new to this, but it should be trivial to look back farther than 3 weeks. What were the past 12, 20, or 100 sales days? Does it dip on most or all of them?

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