Comments on: Jungle Guys’ ESPP Dilemma

By: Luc

Luc — Mon, 17 Sep 2007 09:31:16 +0000

My employer provides the same 15% discount but there is no such thing as “vesting” - the shares are deposited as tradeable stock the same day with eTrade. If you sell there is a settlement period, but the sale price is set the same day.

By: Canadian Capitalist

Canadian Capitalist — Mon, 17 Sep 2007 12:16:52 +0000

Why a one month delay? With a ESPP, there is no such thing as a vesting period. The stock was purchased with your money and the shares should be deposited in your account within a reasonable time. Is there another way to sell earlier? Maybe you can phone in the order?

By: Financial Jungle Guy

Financial Jungle Guy — Mon, 17 Sep 2007 15:45:43 +0000

Thanks for your responses.

How would the employer know how many shares to buy when the purchase is unknown?

The 15% discount is applied against either at the start or at the end of the 6-month ESPP period, which ever is lower. I suppose once the 6 month is up, there’re some overheads to calculate how much to buy and to deliver the shares to you.

By: White Eagle

White Eagle — Mon, 17 Sep 2007 21:53:13 +0000

When I looked into a similar offer from my former high-tech employer, I also thought the 15% was easy money but then when I read all the details, I realized it wasn’t all that great. If I recall correctly, the 15% difference is taxable (can’t recall the reason) plus they would sell the shares at the end of the day (similar to a mutual fund) and they would determine the value of those shares based on some ridiculous formula that didn’t make much sense. On top of that, the company that took care of the program for the employer had a horrible track record (from everything I heard) when it came to addressing employees’ questions, concerns, and complaints. I’d recommend asking around the office to see if anyone had problems selling their shares immediately after the vesting period ended and if they were happy with the program. Hopefully, you can talk to someone fairly knowledgeable about their investments and can give you some sound feedback on the program.

By: Deborah

Deborah — Sun, 23 Sep 2007 18:42:15 +0000

I’d do the same kind of analysis on your company and make the decision based on whether you think they are going to do well or not.

If you think they are undervalued, then buy. If you think they are fairly recession proof, then buy. If you see problems in their financial statements then don’t buy.

By: EmperorCoder

EmperorCoder — Mon, 15 Oct 2007 00:35:59 +0000

I had a similar ESPP with my employer 6 months ago. With a one month “vesting” period as well.

The thing I did was I sold short the stock of my company on the same day that the ESPP trade happened, effectively locking in the 15% discount immediately. I covered the short one month later when the trade settled and I could actually sell the stocks.

Probably wouldn’t work with small cap companies as they might not always be shortable though.

By: Financial Jungle Guy

Financial Jungle Guy — Sun, 21 Oct 2007 06:23:58 +0000

Shorting the stock? What a brilliant idea! The 15% reward is effectively guaranteed.

I missed my ESPP deadline while on vacation, but will implement your suggestion for sure in the next round.

By: Financial Jungle - » I’m Officially Retired Today…

Financial Jungle - » I’m Officially Retired Today… — Fri, 04 Apr 2008 01:02:16 +0000

[…] So right now, I’m sitting at home early stunned, and wondering, “What went wrong?” Was my performance unsatisfactory? Was my pay scale too rich relative to peers? Was I not getting along with co-workers? For sure it’s a tough decision for management to axe a selected group of individuals. I don’t envy their position. We let go some pretty solid people. I also don’t envy the colleagues who have multiple mouths to feed. Finally, I don’t envy the colleagues who have enrolled and kept the company shares from the Employee Stock Purchase Plan. […]

By: Dividend Growth Investor

Dividend Growth Investor — Sat, 14 Jun 2008 18:41:26 +0000

You could actually short the stock to lock the gains. But if you will probably pay margin rates for doing that. Yet you might still end up with a decent gain..