ESPP Purchase/Sale Specifics

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dudeman135
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Joined: Mon Sep 12, 2011 1:27 pm
Location: Ponte Vedra Beach, FL

ESPP Purchase/Sale Specifics

Post by dudeman135 » Fri Jul 13, 2018 10:47 am

Just received an email about our new ESPP going into effect Sept 1. Initial period will be Sept 1-Dec 31, but it will be regular 6 months subscription periods thereafter.

Details:
15% Discount off either the price on the first day or the last day of the Offering Period, whichever closing price is lower
2 Subscription Periods/Year - Jan -June and July-Dec
Contribute 1%-10% of salary
Shares are deposited immediately after close of subscription period and can be sold any time

Having been through an Enron type situation before, I would definitely only buy, sell immediately and rinse/repeat. My question is on the specifics of the purchase and sale. Here is what it says about purchase date...

Purchase Date: This is the same date as the Expiration Date (aka the last business day of an Offering Period). Stock will be purchased as soon as administratively possible after this date and deposited to your brokerage account at E*TRADE.

So if 12/31 is the last day of the offering period and a day the market is open, am I correct in assuming the shares would be placed in the account after the market closed on that date and then you'd be able to sell at the open or possibly pre-market on the next business day?

My company stock isn't typically one that would move like a high flying tech stock in any given day, but I also would like to lock in that gain/sale immediately vs taking on any additional risk. I'm just curious on the specifics of that.

Since the same idea may apply for several thousand employees (22k total) all trying to do the same thing at the same time, has anyone seen a situation where the first trading day of the New Year has resulted in a gap down situation which could erode a good portion of that potential 15% or more gain? Typical share volume per day is 5 million.

Just trying to consider all the factors, as this would be my first ESPP plan purchase. Thanks!

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mhc
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Re: ESPP Purchase/Sale Specifics

Post by mhc » Fri Jul 13, 2018 11:47 am

Don't over think it. It is simple. Contribute the max amount and sell when the share show up in the account. Include it when you do your taxes. Even if everyone sold their shares together, it won't affect the price to the extent that you should care.

I sell immediately every quarter. Sometimes it results in a small cap gain and sometimes a small cap loss. No big deal.

PVW
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Re: ESPP Purchase/Sale Specifics

Post by PVW » Fri Jul 13, 2018 11:57 am

dudeman135 wrote:
Fri Jul 13, 2018 10:47 am
Since the same idea may apply for several thousand employees (22k total) all trying to do the same thing at the same time, has anyone seen a situation where the first trading day of the New Year has resulted in a gap down situation which could erode a good portion of that potential 15% or more gain? Typical share volume per day is 5 million.
Presumably your company ESPP details are public knowledge and stock traders will know the dates. The market is efficient enough to smooth out any selling pressure generated by the new ESPP shares.

Jack FFR1846
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Re: ESPP Purchase/Sale Specifics

Post by Jack FFR1846 » Fri Jul 13, 2018 12:21 pm

Etrade has a future elections page. You can select immediate sale or with hold shares for taxes. Both of these will immediately sell the shares upon vest at the earliest possible time. They'll then take about 4 business days to settle and at that point, you can transfer the money to your own bank account. This is exactly what I do with my ESPP. As close to zero risk as is possible.
Bogle: Smart Beta is stupid

dudeman135
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Joined: Mon Sep 12, 2011 1:27 pm
Location: Ponte Vedra Beach, FL

Re: ESPP Purchase/Sale Specifics

Post by dudeman135 » Fri Jul 13, 2018 1:00 pm

Jack FFR1846 wrote:
Fri Jul 13, 2018 12:21 pm
Etrade has a future elections page. You can select immediate sale or with hold shares for taxes. Both of these will immediately sell the shares upon vest at the earliest possible time. They'll then take about 4 business days to settle and at that point, you can transfer the money to your own bank account. This is exactly what I do with my ESPP. As close to zero risk as is possible.
Perfect, thanks a bunch!

annielouise
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Re: ESPP Purchase/Sale Specifics

Post by annielouise » Fri Jul 13, 2018 1:11 pm

Since it is your first time, be aware that the 15% discount is taxable income (salary). Most companies add it automatically to your paystub and take out income, SS and Medicare taxes. We had one that didn't and that was a bit of a pain.

dudeman135
Posts: 35
Joined: Mon Sep 12, 2011 1:27 pm
Location: Ponte Vedra Beach, FL

Re: ESPP Purchase/Sale Specifics

Post by dudeman135 » Fri Jul 13, 2018 1:13 pm

annielouise wrote:
Fri Jul 13, 2018 1:11 pm
Since it is your first time, be aware that the 15% discount is taxable income (salary). Most companies add it automatically to your paystub and take out income, SS and Medicare taxes. We had one that didn't and that was a bit of a pain.
Yeah I'm aware that would be taxed at the regular income rate, but good advice to check and see if it is added to your paystub or not.

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