Author Topic: Employee stock purchase - am I missing something?  (Read 2938 times)

JLee

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Employee stock purchase - am I missing something?
« on: December 30, 2014, 01:50:21 PM »
Cliff notes - I am selling two vehicles and buying one to replace them. Expecting $12-14k cash from the sales - new-used vehicle is $18,400 financed at 3.24%/60mo. I was initially planning on putting sale proceeds towards the loan, then just paying the vehicle off in a few months to have no loan.  Then I checked my employer's stock (FIS) and it has gone from $20 to $65 in five years, and ~$54 to $65 in the last year. We are still growing, and there's no obvious indication that this growth should change.

I have max'd out the employee match on my 401k already (50% up to 6%, so 3%). I didn't have the financial overhead for stocks when I was hired, but I do now.  We have a 30% incentive after one year, i.e. if I were to take $10k (or whatever number up to my cap - I am not sure what my annual cap is) and purchase FIS stock, after one year I get 30% back in cash or additional stock. 

I don't like having a car loan, but if I can drop $10k now and get $3k in a year, it seems foolish to not consider. Is there something I may be missing, or might this be something I should seriously consider?

shuffler

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Re: Employee stock purchase - am I missing something?
« Reply #1 on: December 30, 2014, 02:44:19 PM »
We have a 30% incentive after one year, i.e. if I were to take $10k (or whatever number up to my cap - I am not sure what my annual cap is) and purchase FIS stock, after one year I get 30% back in cash or additional stock. 
30% is a great employee benefit.

Things to watch out for:
  *  Is the 30% guaranteed, or can it be less if the stock price under-performs?  (Or more if the stock does well?)
  *  Can you sell the stock immediately after the 1 year?
  *  Be wary of how much company-stock you hold in your portfolio.  Recognize that holding a significant amount runs the risk of losing both the value of that stock as well as your salary if something should happen to the company.  (Maybe even the value of your home, if you own a home, and your employer provides many jobs in the area.)

MDM

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Re: Employee stock purchase - am I missing something?
« Reply #2 on: December 30, 2014, 02:47:18 PM »
Consider it for a minute or two - then do it. 

Shuffler has some good caveats, but from what you have presented it is a good deal for you.

JLee

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Re: Employee stock purchase - am I missing something?
« Reply #3 on: December 30, 2014, 02:59:15 PM »
We have a 30% incentive after one year, i.e. if I were to take $10k (or whatever number up to my cap - I am not sure what my annual cap is) and purchase FIS stock, after one year I get 30% back in cash or additional stock. 
30% is a great employee benefit.

Things to watch out for:
  *  Is the 30% guaranteed, or can it be less if the stock price under-performs?  (Or more if the stock does well?)
  *  Can you sell the stock immediately after the 1 year?
  *  Be wary of how much company-stock you hold in your portfolio.  Recognize that holding a significant amount runs the risk of losing both the value of that stock as well as your salary if something should happen to the company.  (Maybe even the value of your home, if you own a home, and your employer provides many jobs in the area.)

I believe the 30% is based on my initial purchase, regardless of interim performance.  I also believe I can sell the stock at any time (though if it was prior to one year, I would likely forfeit the 30% return).

Other than an out of state government retirement account that I have been procrastinating on moving to the private sector (now that I am no longer a government employee, I have to do something with it), I have very minimal investments. Basically starting from scratch right now.

My employer is worldwide and has relatively few employees in my area.  My home is in Phoenix and I bought as the market was coming back up; even if house value were to crash, I wouldn't be able to rent for what my mortgage is.

Thanks for the input! It's looking like this might be a good call, instead of paying off other stuff first (mortgage is 3.75% and car note will be 3.24%, so even if I were to pay something I'd be better off putting it towards the mortgage).

mxt0133

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Re: Employee stock purchase - am I missing something?
« Reply #4 on: December 30, 2014, 03:31:31 PM »
Yeah for a guaranteed 30% I would think about for about one second and do it.  Just sell it as soon as you get your match/cash back and diversify.  Unless you have intimate knowledge about your company and know something most investors don't know, I would diversify immediately.

Remember bulls make money, bears make money, but pigs get slaughtered.

JLee

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Re: Employee stock purchase - am I missing something?
« Reply #5 on: December 30, 2014, 05:11:06 PM »
Ahhh, I misremembered terribly; I was missing something. :(

There doesn't appear to be a lump sum option (and it's 33%) - I can just do 3-15% of my post-tax income, so $468/mo.  I could start that now, though, and after 12 months I would get $154/mo back on a constant basis.

Right now I am at 6% Roth 401k with 50% (3%) match, and 15% to stock plan with deferred 33% match. I've maximized the "free" money from my employer, so once I get everything else paid off I will look into other investment opportunities. For right now, I'm going to focus on catching up with other life matters. :)
« Last Edit: December 30, 2014, 05:32:09 PM by JLee »