Unlocking the Benefits: How AI Legalese Decoder Can Help Navigate Your Employer’s Stock Purchase Plan
- November 28, 2023
- Posted by: legaleseblogger
- Category: Related News
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AI Legalese Decoder is a beneficial tool for employees in situations like this one. It can help break down the legal jargon and provide clear explanations of the terms and conditions surrounding stock purchasing options. The tool can also provide insights into the potential risks and benefits of investing in company stock versus other diversified investment options. By using AI Legalese Decoder, employees can gain a better understanding of the pros and cons of participating in their employer’s stock purchase program, and make more informed decisions about their financial future. Additionally, the tool can offer guidance on diversifying investment portfolios and maximizing the benefits of discounted stock options. Overall, AI Legalese Decoder can be a valuable resource for employees seeking to navigate complex investment opportunities and make well-informed financial decisions.
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****** just grabbed a
It’s generally a good idea, it all depends on how liquid the stock is, what the discount is and how stable your employer is. you should read carefully on the details of your plan.
Once the options vest, it’s recommended to sell the stocks as soon as possible in order to diversify your investments.
Depends on the terms of the plan. Our ESPP discount is 15% and the price would either be the price on the start or at the end of the purchase period whichever is LOWER. So, if you sell immediately after the period ends, you canÔÇÖt really lose money. The only risk is the dollar movement. And yea, you have less money every paycheck.
And being a private vs public company plays a big role. Private: not very liquid and the price is not always visible. Public: itÔÇÖs on the stock market.
Did that during my time at EA. Generally, free money. Rare for stock to fall more than the discounted price in 6 months.
Cannibalizes employee pay, increases stock activity/demand, encourages employees to stay as theyÔÇÖre invested.
Are they a public or private company?
What are the vesting rules? When can you sell?
If the company is stable, it’s almost essentially free money and you’re leaving money on the table not taking it.
If the company is volatile, then there is more risk and you should consider if a 15% discount is worth that risk (usually still yes).
It’d help a lot if we knew the name of the company.
Each ESP is different, private vs public. Maybe get a pro to review the ESP before buying in. When my company provides an ESP, it’s been talked about, I’ll have a lawyer review the plan details before I put money in.
ItÔÇÖs free money, at best. Unless your company is doing poorly I would do it. Sell after the vesting period though.
Did this when I was at UPS. Worked well for me. Was shocked at how few people did it.
Just a reminder that you’ll be taxed on the 15% at your marginal rate at time of stock purchase.
I’ve been working for a bay area company from Canada and had this espp program and I can say you should utilize it to the max. There was a calculator to calculate how many months X holding shares would be required to beat a normal investor who gets the stock without discount. However note that in Canada the discount premium is taxed.
Does the stock pay a dividend, if yes it’s a no-brainer… 15% discount, plus regular dividend payments.
At my employer we don’t get a discount but I buy the equivalent of 6% of my salary every year in stock and my employer matches at 50% up until they reach $2500, so that’s a free $2500 a year.
I have never sold a share and currently receive about 16k a year in dividends.
If you believe in the company, then go for it. If it’s a newer company, there are risks. But if it’s a well established company, it would be a great move as you are doing some good DCA
It’s not a bad deal.. basically a 15% – cap gains.. returns for a year or so. Likely will hover in the 8-12% range depending on where you sit taxes wise.
Edit: Brain fart. Assuming this is a normal stock option, that 15% employer contribution will be part of your overall contribution so,you will pay taxes on it. So your net pains into it will be the 85% + (20% to 40%% on the 15% )…
Assuming a 33% marginal tax rate that means your contribution will be 90% of the book value.. i.e. a 10% gain ..overall ina year with no growth on share value..
Still not a bad deal.
Do you want to own stock in your shitty company?
I bought into this deal in 2006. Just sold at around 1% profit lol
Lucky it was only a thousand bucks or so
I just left my ESPP because IÔÇÖm getting taxed on when theyÔÇÖre purchased and itÔÇÖs effectively adding a few dollars to the cost of a share and the price isnÔÇÖt going up really.
Damn IÔÇÖm so jealous. My company has vesting period of 2 years which is a joke lol
Firstly, I assume this is a public company (and a large one at that)? If not, donÔÇÖt do it. YouÔÇÖre probably not sophisticated enough to navigate that.
So these will almost certainly be ÔÇ£lockedÔÇØ until the next year (some firms have 2-3 year vesting schedules) and if you quit or get fired, you will probably get the employee contribution back but not the employer portion of locked in shares. Read up on the specifics of your case.
How much they match is important as you probably will be overweighted on their stock. You need to make sure that itÔÇÖs relatively unlikely for this investment to lose more than the alternative investment you would be making while accounting for the employer contribution youÔÇÖre getting. The specifics need to be discussed by you and a financial planning professional but if youÔÇÖre getting 0.5 shares per share purchased (33% discount) or more, youÔÇÖll be good in most cases and itÔÇÖs an easy bet.
15% seems low unless the stock is very stable or generally increases.
My company offers 2:1 matching so basically 50%. I buy and sell at the vesting period I can’t really lose but have averaged 30-35% after tax etc.
Is it a private company? Are there any restrictions on when you can sell (like a vesting period)? Whats the discount? Without these details nobody can help you.
Very similar to mine, except that it’s 20% discount I get. Used to be 25% discount ;-(
I have been participating in ESPP for about 22 yrs now at both companies I worked at and, both are publicly traded companies. I think of it as long-term savings, so the fluctuations in stock prices doesn’t really bother me. I’ve cashed out $50K USD about 10 yrs ago because the stock was doing very well and over half of it was capital gains. It’s a good time to accumulate now that everything is on the downside.
When I was 20 I was in Univ part time and the company I worked for (in the mailroom) did this.
I contributed the maximum amount they would allow me to contribute, and they matched 20%.
I worked there for 7 years while I finished my UG degree. That stock option plan paid the down payment on my first home.
What about the trigger? Is there a set price?
Remember you will be paying tax on the gain when you buy the stock, since you are getting a discount, so effectively gaining income. You’d have to exercise your own judgement as to whether you want to diversify, but assuming relatively stable prices, it’s not bad to buy in.
Had a similar plan with a previous employer. I wish I contributed more because the company did really well and continues to do well. I havenÔÇÖt sold a thing, and just let it grow.
But if you arenÔÇÖt confident with the future of the company, you can do what otherÔÇÖs suggested, sell after the vesting period.
Depends on your risk tolerance and style of investing, PFC is largely against individual stocks. Is it a large cash burning tech business or a bluechip that will exist in the long-run and continually makes a stable profit. They are two very different scenarios and there are many others inbetween.
My friend has the same discount and vesting structure as yours and his company just dropped from $12 to $8 in a day, the risk was minimal as it was 15% of his compensation. Its currently a fairly new company that has lost money for a few years, if it cant generate a profit it will cease to exist one day, regardless hes still holding in the hopes that it may hit big one day. As an outsider ive actually been buying shares in his company as well.
The last company i worked for was top 20 fortune 500 and although i had next to no discount the price of shares went up over 1000% in 12 years from when I started purchasing, ended up with over a 400% gain when i sold last year slowly buying twice a year with my bonus for about a decade. Evidently its was a mistake in hindsight to sell as well since its up over 20% since. I know of a few people who retired really early because they got in on buying shares aggressively when the company was small.
Keep in mind your average equity tends to trade 50%+- in a given year, if you cant stomach that kind of stuff its probably best to avoid it.
The only thing that gives me a pause if the 6-month waiting period. I’ve never come across that before. most plans I’ve participated in let you sell immediately.
I am slightly biased and wary because the company I work for had its publicly traded stock drop by over 75% in 2022 (we are private now). A 6 month waiting period would have resulted in a significant loss. Doubly so because you were taxed on the 15% gain immediately upon purchasing. With a 6 month wait, you would have found yourself paying taxes on a benefit you never received.
Which raises the question: With your company, do you get taxed on the 15% discount, or the value after 6 months?
I use it on a regular basis. Never regretted. One important aspect is how the FMV at purchase is set. In our case it is the lower between the one on the offering date or the purchase date, which is a huge advantage as you simply can’t lose if selling right away.
Only thing that would give me pause is the 6 month holding period before selling. Is the stock pretty volatile? Or is the 15% likely to cover any drop. No one has a crystal ball, so you have to assess that risk for yourself.
I’d probably still do it, but maybe not max out just because of that holding period.
But depends on what company it is.
Yes you should buy in but the hold for 6 months is interesting because this is not typical requirement
So judge on your company’s past performance and take a risk. Assume your net return to be half of that 15% discount because Canada taxes the discount benefit as income tax and your marginal tax may mean up to 53 percent cut
It’s decent way to buy stocks. If you didn’t work there would you buy the stock. Are you comfortable with the risk. Do you expect them to go up during the time frame you will be there.
Is it grown company? Check online what analysis has been done about expected stock price?
Yes. Sell as soon as you can.
Years ago when I worked for Intertan (RadioShack Parent company in Canada, UK and Australia) we could purchase stock with a company match up to a certain amount. One year the stock was garbage and doing very poorly, by the end of the fiscal year I had invested approx $3,000 of my own money and when I sold that year I had $20,000 in my account.
Most years were not like that and it was really just a savings account but that year I made out like a bandit. So it can be lucrative, but you have to be willing to risk your original investment.
I held onto my shares my entire career (27 yrs) Had about 650k a few years after retirement when I started to sell. Company gave 6% and I matched.
My wife made some decent coin taking advantage of this at Loblaw when she worked there (obligatory fuck you Galen Weston).
If your company is similarly stable to a grocery store during the pandemic then I’d say go for it.
Automatic 15% is decent. My company offers 33.33% (up to 6% of my base salary) which I have been taking advantage of for 7 years. The stock value is into 6 figures now. I show coworkers who donÔÇÖt do it my account and they kick themselves.
For me it greatly depends on which company it is. I have friends who have invested heavily into the companies they worked for and their investments have been taking over 50% because the companies aren’t doing that great.
If it’s a blue chip stock, I would say to for it
Depends if the stock is volatile or not. If it is, don’t do it.
Take the free cash man. Sell them once a year or so. Not taking the free cash and buying the stock is stupid
Yes itÔÇÖs a free 15% return on 10k every six months at minimum. At max itÔÇÖs more.
My company this past year has the share price lock in at $130. I buy at $110, and the current share price is $225, if you wanna do that math
Use your employee knowledge advantage to help you decide. But at a 15% discount to the market, I would.
Last time I worked at a place with an ESPP (about 10 years ago), they had a 40% discount and no lock-in period. Most people just maxed it out and sold right away.
Looking back, it was a great deal for employees, but not sure what was in it for the company.
I would do it