Comments on: Profit From Employee Stock Purchase Plans – I

By: Profit from Employee Stock Purchase Plans (ESPP) - II

Profit from Employee Stock Purchase Plans (ESPP) - II — Mon, 17 Sep 2007 00:00:58 +0000

[...] are used to purchase company stock at market value once during every pay period. This flavour of ESPPs differ from those offered by US-based companies in two [...]

By: Warren

Warren — Wed, 29 Aug 2007 20:46:42 +0000

My employer (very large US company), offers up to 15% of my salary deducted for a quarterly purchase at 15% off the value at either the beginning or the end of the period. It used to be 15% off the lowest value throughout the offering period, which was awesome.

As mentioned above, good luck making this kind of return over 3 months with almost any other investment.

I used to flip it every 3 months, but in the last few offerings I’ve decided to hold on. Its a blue chip stock, so there won’t be any major swings, but I’ve been reading some favorable analysis and I think it has a chance to grow, plus the odd dividend doesn’t hurt.

By: Dan

Dan — Tue, 21 Aug 2007 23:07:19 +0000

ESPP plans vary dramatically in the amount of discount and the length of time the individual gets to keep their discount. About 50% of companies have 6 month purchase periods (“contribution periods”) as described in the original posting. The 10% discount does nto seem like much, but consider that it is difficult to get a 10% return on any investment over a six-month period.

If you are very conservative you can sell immediately after purchase an take the approximately 10% (minus ay taxes). If you are more confident in the company;s stock you can hold on and make more. If you happen to end up being a US taxpayer, you can even get a discount on taxes if you hold the shares long enough. If the stock rises during the purchase period your gain is certain to be more than 10% if you sell immediately.

These plans are excellent way to become a stock owner. They are also a great way to “buy your bonus”. Many companis pay bonuses of less than 10%. If you can afford to contribute the max, and you sell right away you can augment your corporate bonus nicely.

Be aware of other discounted or match style programs your company offers and seek professional help in comparing them. You may find that putting away everything possible today, is a great way to put away less tomorrow.

By: Tom

Tom — Tue, 21 Aug 2007 01:05:00 +0000

FYI, this is a US style ESPP, as defined by section 423 of the US internal revenue code. You’ll likely see this kind of plan set up if you work for an american company.

Canadian companies more typically have the second flavor of ESPP which you mention, in which the discounted price and is replaced with the company match portion.

By: Canadian Capitalist

Canadian Capitalist — Mon, 20 Aug 2007 23:01:42 +0000

Aleks: I believe IBM was among to first to cut back on the discount and eliminate the look back. My employer’s discount is 15%. If it is only 5%, I may not participate.

By: Aleks

Aleks — Mon, 20 Aug 2007 21:50:46 +0000

I just sold out of IBM’s ESPP. The discount is only 5%, there’s no look-back or other discounts (you buy shares at the current price each pay period), and once you sell any shares you’re locked out of buying more shares for a year. That, plus having my investment and employment eggs in the same basket and my suspicion that the US bull market is over made me decide that the ESPP is not, in fact, free money.