Help with ESPP

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stocknoob4111
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Help with ESPP

Post by stocknoob4111 »

Just onboard in a new job and i've never done the ESPP before. Have been doing research and it looks like the best option is to sell the shares immediately after the purchase date. The clarification I need is the vesting period. I see many recommendations to sell the ESPP shares immediately after purchase as the best option to reduce equity holding risk and cash in on a guaranteed return... however, if there is a vesting period then how is this even possible?

Assuming I have no cash flow problems and can contribute 15% towards ESPP I understand that this money will be tied up during the offering period (6 months) until the shares are bought at the end of the period. I could've invested the same money in the S&P 500 instead. However, due to the guaranteed 17.6% return if selling shares immediately I am assuming the ESPP is a better bet?
PaunchyPirate
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Re: Help with ESPP

Post by PaunchyPirate »

stocknoob4111 wrote: Tue Jul 21, 2020 5:54 pm Just onboard in a new job and i've never done the ESPP before. Have been doing research and it looks like the best option is to sell the shares immediately after the purchase date. The clarification I need is the vesting period. I see many recommendations to sell the ESPP shares immediately after purchase as the best option to reduce equity holding risk and cash in on a guaranteed return... however, if there is a vesting period then how is this even possible?

Assuming I have no cash flow problems and can contribute 15% towards ESPP I understand that this money will be tied up during the offering period (6 months) until the shares are bought at the end of the period. I could've invested the same money in the S&P 500 instead. However, due to the guaranteed 17.6% return if selling shares immediately I am assuming the ESPP is a better bet?
It’s a little unclear what the terms of your ESPP is. Are you saying they will always purchase the shares at a 17.6% discount? If so, that’s great.

You are on the right track. Many (most?) on this forum will advise to sell the shares as soon as you can to lock in the profit and not risk overexposing yourself to a single stock from a company that also pays your salary. But plans vary in vesting periods. When I had an ESPP, there was no vesting period and I could sell the next day after I got my shares. But some have to wait a while...months, a year, Or more. The longer you have to hold before you can sell, the greater risk that the share values could plummet into a loss. It’s a bit of a risk exercise if the vesting isn’t immediate. It’s up to you to decide how much risk you want to take. The value could also go up during the vesting period. Then you are a bigger winner. But no one can know in advance.
Jack FFR1846
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Re: Help with ESPP

Post by Jack FFR1846 »

I think there's confusion in terms. Vesting is for options or RSUs where there's a stated share that you'll get on such a date. That date is when the shares vest and become yours. For ESPP, your shares are bought with your money for a discount. The key is whether you can immediately sell or if there is a HOLDING PERIOD. If there is a holding period, you can't sell them immediately. Personally, I would entirely skip it as I've worked for companies (big, stable tech companies) where the stock dropped like a rock in a very short period. You cannot guaranty your company won't.
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stocknoob4111
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Re: Help with ESPP

Post by stocknoob4111 »

Thanks! The shares are at a 15% discount (which I believe is the standard for most ESPPs) which computes to a 17.6% return.

There are 2 offering periods of 6 months Apr-Sep and Oct-Mar with purchase dates at the end of the offering period. There isn't any mention of any vesting period but in some places I have read that most ESPPs have no vesting (unlike RSUs).

I would definitely sell immediately as I do not want to take equity risk holding individual stocks. For instance at the end of the offering period it's entirely possible that the stock has been bid up to an overvaluation and risks falling sharply, however if I sell immediately then there is no risk at all.

The lookback period is also at the beginning and end of the offering period so that could work in my favor. I hope I am understanding this correctly.

The stock in question is a component of the S&P 500 so I am assuming if there is a huge drop in the index this stock will also drop quite a bit (perhaps more than the S&P 500 itself) so that would actually benefit me due to the lookback.
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stocknoob4111
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Re: Help with ESPP

Post by stocknoob4111 »

Jack FFR1846 wrote: Tue Jul 21, 2020 7:27 pmThe key is whether you can immediately sell or if there is a HOLDING PERIOD. If there is a holding period, you can't sell them immediately.
Thanks, I think I mixed up the terms... yes, I should verify if there is a holding period. I agree with you that if there is one then it's not worth it.
greengrass222
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Re: Help with ESPP

Post by greengrass222 »

The thing with ESPP is that you want the stock to be volatile so you get the largest price difference between the first week and the last week of the 6 month period. That will potentially give you more than 15% earnings that you are otherwise nearly guaranteed (not absolutely guaranteed because fair market value and fees get in the way). On the other hand, if your company's stock is very stable, it could very well be worth it to hold onto your stocks for at least 2 additional years, where you would qualify for the lower capital gains tax rate. You usually earn dividends as well, so that can offset any temporary drops in the stock price. If you sell immediately or within 2 years, you'll play ordinary taxes as if it was salary so the returns are less but more predictable.

I recommend to most that you don't quick sale unless you need the cash immediately. Rather check the price soon after the 6 month period is up and decide if you want to sell or hold. Typically I wait until the price of my company's stock is with 90% of the recent high and then sell. I don't sell immediately as I want to keep these stocks as a cash reserve so that when the total market is going down quite a lot, I can sell the company stock and buy VTSAX at a low price.

If you have ESPP, you might also have a similar program called restricted stock or RSU. I usually sell these immediately after they vest and buy index funds.
RocketShipTech
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Re: Help with ESPP

Post by RocketShipTech »

greengrass222 wrote: Wed Jul 22, 2020 12:50 am The thing with ESPP is that you want the stock to be volatile so you get the largest price difference between the first week and the last week of the 6 month period. That will potentially give you more than 15% earnings that you are otherwise nearly guaranteed (not absolutely guaranteed because fair market value and fees get in the way). On the other hand, if your company's stock is very stable, it could very well be worth it to hold onto your stocks for at least 2 additional years, where you would qualify for the lower capital gains tax rate.
It is the opposite of what you are saying.

If the stock jumps up between the six months, you should more strongly consider holding for 18 more months so that it becomes a qualified distribution and the profit is taxed at LTCG rates.

If the stock doesn’t move and you only get the 17% “compensation element” (which is always taxed at ordinary income rates), then there is no point in waiting to sell as there is no additional profit to be taxed at LTCG.

My own experience here:

viewtopic.php?t=318261
babystep
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Re: Help with ESPP

Post by babystep »

stocknoob4111 wrote: Tue Jul 21, 2020 7:29 pm
Jack FFR1846 wrote: Tue Jul 21, 2020 7:27 pmThe key is whether you can immediately sell or if there is a HOLDING PERIOD. If there is a holding period, you can't sell them immediately.
Thanks, I think I mixed up the terms... yes, I should verify if there is a holding period. I agree with you that if there is one then it's not worth it.
Please check the rules carefully about the purchase date and price. Also, don't discard ESPP so quickly. ESPP could be one of the best investment options out there. e.g. sometimes they take the minimum of the starting period and closing period price and then apply the 15% discount for the purchase price.

Please also see that the rate of return can be very high.
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stocknoob4111
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Re: Help with ESPP

Post by stocknoob4111 »

babystep wrote: Wed Jul 22, 2020 1:43 am Please check the rules carefully about the purchase date and price. Also, don't discard ESPP so quickly. ESPP could be one of the best investment options out there. e.g. sometimes they take the minimum of the starting period and closing period price and then apply the 15% discount for the purchase price.
The problem is that this particular stock has appreciated 285% since it's mid 2016 price which causes a bit of alarm. TTM PE is listed as 23. Now the valuation may be legitimate or it may be very overvalued, I have no idea. But that represents a much higher risk to my portfolio. The selling of the ESPP shares are to manage risk and put it into a diversified index.

You are right, this ESPP has a 6 month lookback and takes the minimum price of the offering period's starting/closing. Then it applies the 15%, but those gains can be immediately realized and locked in if I sell right away. That is the motivation for it... i.e. realize the gain right away OR take single equity risk with the money.
AB609
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Re: Help with ESPP

Post by AB609 »

I participate in my company's plan but I'm limited to $3000 a quarter. I sell as soon as I get the shares at the end of the quarter. I consider it to be a 3 month CD with a 15% return from an investment perspective (even better really since it gets funded incremental over the quarter). I also hold stock through an RSU program and sell the shares as soon as they vest as well. The company is is a beaten down industry and I don't have much faith the the Stock Price is going to increase much.
greengrass222
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Re: Help with ESPP

Post by greengrass222 »

It really depends what company you work for. Quicksale is definitely an easy way to go, ~10% guaranteed earnings when you factor in taxes. But if you have the time, research how your company stock does vs S&P500. If there is a consistent but opposite trend, you could certainly make more by selling long term if your stock price is high and the market is low.

stocknoob4111 wrote: Wed Jul 22, 2020 11:17 am
babystep wrote: Wed Jul 22, 2020 1:43 am Please check the rules carefully about the purchase date and price. Also, don't discard ESPP so quickly. ESPP could be one of the best investment options out there. e.g. sometimes they take the minimum of the starting period and closing period price and then apply the 15% discount for the purchase price.
The problem is that this particular stock has appreciated 285% since it's mid 2016 price which causes a bit of alarm. TTM PE is listed as 23. Now the valuation may be legitimate or it may be very overvalued, I have no idea. But that represents a much higher risk to my portfolio. The selling of the ESPP shares are to manage risk and put it into a diversified index.

You are right, this ESPP has a 6 month lookback and takes the minimum price of the offering period's starting/closing. Then it applies the 15%, but those gains can be immediately realized and locked in if I sell right away. That is the motivation for it... i.e. realize the gain right away OR take single equity risk with the money.
babystep
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Re: Help with ESPP

Post by babystep »

stocknoob4111 wrote: Wed Jul 22, 2020 11:17 am
babystep wrote: Wed Jul 22, 2020 1:43 am Please check the rules carefully about the purchase date and price. Also, don't discard ESPP so quickly. ESPP could be one of the best investment options out there. e.g. sometimes they take the minimum of the starting period and closing period price and then apply the 15% discount for the purchase price.
The problem is that this particular stock has appreciated 285% since it's mid 2016 price which causes a bit of alarm. TTM PE is listed as 23. Now the valuation may be legitimate or it may be very overvalued, I have no idea. But that represents a much higher risk to my portfolio. The selling of the ESPP shares are to manage risk and put it into a diversified index.

You are right, this ESPP has a 6 month lookback and takes the minimum price of the offering period's starting/closing. Then it applies the 15%, but those gains can be immediately realized and locked in if I sell right away. That is the motivation for it... i.e. realize the gain right away OR take single equity risk with the money.
Yes, agree. I didn't suggest holding it for the long-term. One can participate and sell as soon as they get the stocks. Most of the time it is all automated.
teamDE
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Re: Help with ESPP

Post by teamDE »

My wife just started with her ESPP program at work. It offers a 15% discount on the lowest of the price at beginning or end of the six month period. There is no holding period.

So if the stock was $100 on Jan 1, and $150 on July 1, we would be buying the stock at $100 - 15% = $85? Then we'd immediately sell for $150 and make a $65 profit that would be taxed at STGC, right?

Seems too good to be true. :shock:
RocketShipTech
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Re: Help with ESPP

Post by RocketShipTech »

teamDE wrote: Wed Jul 22, 2020 4:13 pm My wife just started with her ESPP program at work. It offers a 15% discount on the lowest of the price at beginning or end of the six month period. There is no holding period.

So if the stock was $100 on Jan 1, and $150 on July 1, we would be buying the stock at $100 - 15% = $85? Then we'd immediately sell for $150 and make a $65 profit that would be taxed at STGC, right?

Seems too good to be true. :shock:
Yes that’s how it works. Congrats to your wife on working for a rocket ship company.

If she were to hold the shares for 18 more months and the price stayed at $150, the $50 portion of the profit ($100 to $150) would be taxed at LTCG.
shess
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Re: Help with ESPP

Post by shess »

stocknoob4111 wrote: Tue Jul 21, 2020 5:54 pm Assuming I have no cash flow problems and can contribute 15% towards ESPP I understand that this money will be tied up during the offering period (6 months) until the shares are bought at the end of the period. I could've invested the same money in the S&P 500 instead. However, due to the guaranteed 17.6% return if selling shares immediately I am assuming the ESPP is a better bet?
Its been decades since I had access to an ESPP, but when I did, I found it helpful to run some scenarios. Admittedly, things like the stock price itself are unknowns, but make some assumptions for return and volatility (like S&P500 *2, maybe), and then see if any scenarios simply argue against themselves from the get-go.

Also, you should look into limitations on amounts - from what I recall, you could be limited as a percentage of your income, but ALSO there were absolute limits per calendar year. For instance, you might be limited to $25k per calendar year, which is %15 of $166k.

For instance, one scenario is pony up the max amount you're allowed, sell ASAP, and participate in each offering period. Say you can invest $10k per period, then you're rolling that $10k over repeatedly, you have to front an additional $10k where there's an overlap between one offering period starting and the previous sale clearing with money in your account. But over the long run, you're mostly out $10k in seed money. You'll have a certain return, call it 17.6%, so you're (hopefully) generating $3400/year, which is really solid. Your call if you feel it's more fair to net out taxes at income-tax rates.

Another scenario might be to try for LTCG treatment. Say it's an 18-month holding period on top of the offering period, so you'll effectively have to front $40k to cover four holding periods, plus $10k to cover the gap between the start of the fifth period and when you can clear the first period's results. For this, you'll make your guaranteed 17.6% plus/minus your actual expected return in the 18-month period. This is obviously a guesstimate. Say you expect 35% in 2 out of 3 years, and -20% in the third year. Then calculate that out (perhaps just populate a spreadsheet) and see if it's worthwhile, especially after taxes. Obviously, you're putting in 4x as much capital, so you'll probably find out that the return is lower than just ASAP-selling, but keep in mind how that compares to whatever else you'd do with that money. Possibly the 17.6% guarantee at the start makes the overall risk feel worthwhile to you - just make sure you're comparing it relative to the sell-ASAP plan, not on absolute terms. The risk needs to balance out the delta relative to a sell-ASAP approach blended with whatever else you'd do with that capital, not the delta relative to staying out of the plan entirely!

Keep in mind your other equity exposures. Usually ESPP plans are offered in addition to RSU and/or option plans. Does that push your total exposure to the company to an uncomfortable position? Keep in mind that losses on unvested RSUs or options really don't count, because you can't do anything about them, but losses from holding the ESPP do count because you chose that route (likewise if you hold options or RSUs as they vest). That said, don't let fear of missing out goose you into a big bet on the ESPP - if you have options or RSUs vesting, then if the company does really well, they'll do really well and you'll do really well.
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emlowe
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Re: Help with ESPP

Post by emlowe »

teamDE wrote: Wed Jul 22, 2020 4:13 pm My wife just started with her ESPP program at work. It offers a 15% discount on the lowest of the price at beginning or end of the six month period. There is no holding period.

So if the stock was $100 on Jan 1, and $150 on July 1, we would be buying the stock at $100 - 15% = $85? Then we'd immediately sell for $150 and make a $65 profit that would be taxed at STGC, right?

Seems too good to be true. :shock:
Actually 150-85 = $65 taxed at W2 regular income rates. it will (should) appear on your W2 as regular compensation income

So yes, a look-back mechanism in an ESPP can be very lucrative.

Almost always you should sell right away. One way to think about it is - instead of getting $65 by selling the stock imagine they company just gave your a $65 bonus. Would you turn around and buy your company stock? For most bogleheads the answer is no. So if you wouldn't buy the stock with your imaginary bonus - why would you hold your ESPP shares?
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Re: Help with ESPP

Post by geerhardusvos »

stocknoob4111 wrote: Tue Jul 21, 2020 5:54 pm Just onboard in a new job and i've never done the ESPP before. Have been doing research and it looks like the best option is to sell the shares immediately after the purchase date. The clarification I need is the vesting period. I see many recommendations to sell the ESPP shares immediately after purchase as the best option to reduce equity holding risk and cash in on a guaranteed return... however, if there is a vesting period then how is this even possible?

Assuming I have no cash flow problems and can contribute 15% towards ESPP I understand that this money will be tied up during the offering period (6 months) until the shares are bought at the end of the period. I could've invested the same money in the S&P 500 instead. However, due to the guaranteed 17.6% return if selling shares immediately I am assuming the ESPP is a better bet?
Just max it out every single six month period, and as soon as it vests and can be cashed out, sell it (harvesting the gains). Then use that money as additional income to spend or invest as you see fit
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RocketShipTech
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Re: Help with ESPP

Post by RocketShipTech »

emlowe wrote: Wed Jul 22, 2020 4:45 pm
teamDE wrote: Wed Jul 22, 2020 4:13 pm My wife just started with her ESPP program at work. It offers a 15% discount on the lowest of the price at beginning or end of the six month period. There is no holding period.

So if the stock was $100 on Jan 1, and $150 on July 1, we would be buying the stock at $100 - 15% = $85? Then we'd immediately sell for $150 and make a $65 profit that would be taxed at STGC, right?

Seems too good to be true. :shock:
Actually 150-85 = $65 taxed at W2 regular income rates. it will (should) appear on your W2 as regular compensation income

So yes, a look-back mechanism in an ESPP can be very lucrative.

Almost always you should sell right away. One way to think about it is - instead of getting $65 by selling the stock imagine they company just gave your a $65 bonus. Would you turn around and buy your company stock? For most bogleheads the answer is no. So if you wouldn't buy the stock with your imaginary bonus - why would you hold your ESPP shares?
Your example is appropriate for RSUs but not exactly right for ESPP.

For ESPP with a big run up in stock price, the example is more like: the company gives you an option between (1) a $65 cash bonus taxed as such, or (2) stock worth $65 today that vests in 18 months and most of which would be taxed at LTCG once you sell.
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emlowe
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Re: Help with ESPP

Post by emlowe »

RocketShipTech wrote: Wed Jul 22, 2020 4:51 pm
emlowe wrote: Wed Jul 22, 2020 4:45 pm
teamDE wrote: Wed Jul 22, 2020 4:13 pm My wife just started with her ESPP program at work. It offers a 15% discount on the lowest of the price at beginning or end of the six month period. There is no holding period.

So if the stock was $100 on Jan 1, and $150 on July 1, we would be buying the stock at $100 - 15% = $85? Then we'd immediately sell for $150 and make a $65 profit that would be taxed at STGC, right?

Seems too good to be true. :shock:
Actually 150-85 = $65 taxed at W2 regular income rates. it will (should) appear on your W2 as regular compensation income

So yes, a look-back mechanism in an ESPP can be very lucrative.

Almost always you should sell right away. One way to think about it is - instead of getting $65 by selling the stock imagine they company just gave your a $65 bonus. Would you turn around and buy your company stock? For most bogleheads the answer is no. So if you wouldn't buy the stock with your imaginary bonus - why would you hold your ESPP shares?
Your example is appropriate for RSUs but not exactly right for ESPP.

For ESPP with a big run up in stock price, the example is more like: the company gives you an option between (1) a $65 cash bonus taxed as such, or (2) stock worth $65 today that vests in 18 months and most of which would be taxed at LTCG once you sell.
Assuming you have a crystal ball in which in those 18 months the stock does not drop below what you could have sold it for immediately. This is the equivalent of wanting to own the stock and is not particulary boglehead-ish. I realize people working for FAANG and related companies believe their stock will never go down, but I've worked at plenty of tech companies where it has.
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RocketShipTech
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Re: Help with ESPP

Post by RocketShipTech »

emlowe wrote: Wed Jul 22, 2020 5:03 pm
RocketShipTech wrote: Wed Jul 22, 2020 4:51 pm
emlowe wrote: Wed Jul 22, 2020 4:45 pm
teamDE wrote: Wed Jul 22, 2020 4:13 pm My wife just started with her ESPP program at work. It offers a 15% discount on the lowest of the price at beginning or end of the six month period. There is no holding period.

So if the stock was $100 on Jan 1, and $150 on July 1, we would be buying the stock at $100 - 15% = $85? Then we'd immediately sell for $150 and make a $65 profit that would be taxed at STGC, right?

Seems too good to be true. :shock:
Actually 150-85 = $65 taxed at W2 regular income rates. it will (should) appear on your W2 as regular compensation income

So yes, a look-back mechanism in an ESPP can be very lucrative.

Almost always you should sell right away. One way to think about it is - instead of getting $65 by selling the stock imagine they company just gave your a $65 bonus. Would you turn around and buy your company stock? For most bogleheads the answer is no. So if you wouldn't buy the stock with your imaginary bonus - why would you hold your ESPP shares?
Your example is appropriate for RSUs but not exactly right for ESPP.

For ESPP with a big run up in stock price, the example is more like: the company gives you an option between (1) a $65 cash bonus taxed as such, or (2) stock worth $65 today that vests in 18 months and most of which would be taxed at LTCG once you sell.
Assuming you have a crystal ball in which in those 18 months the stock does not drop below what you could have sold it for immediately. This is the equivalent of wanting to own the stock and is not particulary boglehead-ish. I realize people working for FAANG and related companies believe their stock will never go down, but I've worked at plenty of tech companies where it has.
I did not suggest that it is always a good idea to pick option 2. Far from it. But people should know about the option.

Generally speaking, option 2 becomes more attractive:

1. The larger the difference between your ordinary income tax rate and your LTCG rate, and
2. The higher the stock run-up during the six month purchase period.

One can calculate a “breakeven stock price” for option 2 that yields the same after-tax amount as selling immediately and assess how likely it is the stock would stay above that price in 18 months.
Last edited by RocketShipTech on Wed Jul 22, 2020 5:11 pm, edited 1 time in total.
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stocknoob4111
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Re: Help with ESPP

Post by stocknoob4111 »

Thanks, one hypothetical question - from the material I am reading the ESPP is funded through periodic payroll deductions. So, what exactly happens if you leave the company or get laid off in the interim. That money is refunded to you or is it deposited as cash in your brokerage account?
shess
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Re: Help with ESPP

Post by shess »

teamDE wrote: Wed Jul 22, 2020 4:13 pm My wife just started with her ESPP program at work. It offers a 15% discount on the lowest of the price at beginning or end of the six month period. There is no holding period.

So if the stock was $100 on Jan 1, and $150 on July 1, we would be buying the stock at $100 - 15% = $85? Then we'd immediately sell for $150 and make a $65 profit that would be taxed at STGC, right?

Seems too good to be true. :shock:
At one employer, they refused to offer an ESPP plan because they saw it as a way to transfer money from shareholders to employees who could afford to pony up to participate. Which is true enough. Options and RSUs also transfer money from shareholders to employees, but participation is not based on the employee's individual financial situation.
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emlowe
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Re: Help with ESPP

Post by emlowe »

stocknoob4111 wrote: Wed Jul 22, 2020 5:05 pm Thanks, one hypothetical question - from the material I am reading the ESPP is funded through periodic payroll deductions. So, what exactly happens if you leave the company or get laid off in the interim. That money is refunded to you or is it deposited as cash in your brokerage account?
It may be company/plan specific, but in my experience, it is refunded to you in your last paycheck
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inbox788
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Re: Help with ESPP

Post by inbox788 »

AB609 wrote: Wed Jul 22, 2020 1:09 pm I participate in my company's plan but I'm limited to $3000 a quarter. I sell as soon as I get the shares at the end of the quarter. I consider it to be a 3 month CD with a 15% return from an investment perspective (even better really since it gets funded incremental over the quarter). I also hold stock through an RSU program and sell the shares as soon as they vest as well. The company is is a beaten down industry and I don't have much faith the the Stock Price is going to increase much.
If you get 15% return annualized every quarter, you're buying 12k/year, that's 60% ROI on the 3k, no? Sounds good to me (beaten down industry and loss of faith in company be damned)! Where do I sign up? Oh I can't, darn! IMO, too many employees are passing up on a good benefit, even if it's limited and carries some risk.

There was a thread recently about qualified vs non-qualified, and only matters if the stock rockets, so don't hold it longer than you need to unless there's that sort of potential or already happened because of some waiting requirement. I think my conclusion was probably not unless there was good reason to. (the reverse of my default for ESPP which is to participate unless was good reason not to).

Should I ever hold ESPP until a qualifying disposition?
viewtopic.php?f=1&t=318261
teamDE
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Re: Help with ESPP

Post by teamDE »

RocketShipTech wrote: Wed Jul 22, 2020 5:04 pm
emlowe wrote: Wed Jul 22, 2020 5:03 pm
RocketShipTech wrote: Wed Jul 22, 2020 4:51 pm
emlowe wrote: Wed Jul 22, 2020 4:45 pm
teamDE wrote: Wed Jul 22, 2020 4:13 pm My wife just started with her ESPP program at work. It offers a 15% discount on the lowest of the price at beginning or end of the six month period. There is no holding period.

So if the stock was $100 on Jan 1, and $150 on July 1, we would be buying the stock at $100 - 15% = $85? Then we'd immediately sell for $150 and make a $65 profit that would be taxed at STGC, right?

Seems too good to be true. :shock:
Actually 150-85 = $65 taxed at W2 regular income rates. it will (should) appear on your W2 as regular compensation income

So yes, a look-back mechanism in an ESPP can be very lucrative.

Almost always you should sell right away. One way to think about it is - instead of getting $65 by selling the stock imagine they company just gave your a $65 bonus. Would you turn around and buy your company stock? For most bogleheads the answer is no. So if you wouldn't buy the stock with your imaginary bonus - why would you hold your ESPP shares?
Your example is appropriate for RSUs but not exactly right for ESPP.

For ESPP with a big run up in stock price, the example is more like: the company gives you an option between (1) a $65 cash bonus taxed as such, or (2) stock worth $65 today that vests in 18 months and most of which would be taxed at LTCG once you sell.
Assuming you have a crystal ball in which in those 18 months the stock does not drop below what you could have sold it for immediately. This is the equivalent of wanting to own the stock and is not particulary boglehead-ish. I realize people working for FAANG and related companies believe their stock will never go down, but I've worked at plenty of tech companies where it has.
I did not suggest that it is always a good idea to pick option 2. Far from it. But people should know about the option.

Generally speaking, option 2 becomes more attractive:

1. The larger the difference between your ordinary income tax rate and your LTCG rate, and
2. The higher the stock run-up during the six month purchase period.

One can calculate a “breakeven stock price” for option 2 that yields the same after-tax amount as selling immediately and assess how likely it is the stock would stay above that price in 18 months.
I see (this and all the nested quotes). Thanks!
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