Author Topic: ESPP with volatile stock  (Read 1780 times)

thecrazydoglady

  • 5 O'Clock Shadow
  • *
  • Posts: 25
ESPP with volatile stock
« on: November 03, 2016, 08:14:16 AM »
Hi all,

I know typically Employee Stock Purchase Programs are no-brainers but I'm starting to feel unsure about mine and am looking for guidance. The SW company I work for recently started an ESPP that allows us to purchase up to 10% of our income in stock at 15% off of the stock price with a 6 month look back period. I can sell it immediately after buying. I was so excited and contributed 10% of my income for the period. The stock price with discount at the time was $33 and it is now up to $48! Woohoo!

The problem: now our stock price is at the highest it has ever been. I'm pretty confident that our company will eventually do well but our stock is extremely volatile because we are in an emerging market. Since best practice is to sell the day you buy, I don't want to be stuck selling in an unstable dip. Would you buy in to the company with the stock price at the highest it's ever been? I'd appreciate a different perspective. I'm leaning towards buying but not the full 10%.

Thanks!


seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5336
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: ESPP with volatile stock
« Reply #1 on: November 03, 2016, 08:33:31 AM »
Is it a 15% discount off the lower of the current price or the six-months-ago price? If so, you win by selling right away whether the stock is on its way up or down.

PlainsWalker

  • Stubble
  • **
  • Posts: 101
  • Age: 36
  • Location: Oklahoma City, OK
Re: ESPP with volatile stock
« Reply #2 on: November 03, 2016, 09:14:56 AM »
There is a one year holding requirement on the ESPP that my employer offers. Even with the holding period, after sitting down with a spreadsheet and fiddling with the numbers for a bit it still made sense to participate. The match is so good that the company would have to tank hard for me to lose money on the deal.

Saskatchewstachian

  • Stubble
  • **
  • Posts: 212
  • Age: 29
  • Location: SK
Re: ESPP with volatile stock
« Reply #3 on: November 03, 2016, 09:22:58 AM »
There is a one year holding requirement on the ESPP that my employer offers. Even with the holding period, after sitting down with a spreadsheet and fiddling with the numbers for a bit it still made sense to participate. The match is so good that the company would have to tank hard for me to lose money on the deal.

Similar situation here but the company holding requirement is 3 years. After 3 years, for each share that you bought you get a 1 for 1 match. i.e. buy 100 shares in 2013 and get 100 more shares in 2016. So even if the stock returns 0% over the 3 years i'm still making a 100% return! The downsides though is that it's a resource company so the stock is down ~50% in the last couple years. The upside is that I just started in the program in Jan and got my first set of shares purchased at the absolute bottom :)

To OP, I know this is possibly cliche but buy low sell high. By buying through your share program you already have the buy low part covered and now if you've seen that much of a rise and think it may drop, for goodness sake sell high!

Spitfire

  • Bristles
  • ***
  • Posts: 299
  • Location: Weston, FL
Re: ESPP with volatile stock
« Reply #4 on: November 03, 2016, 09:30:55 AM »
OP your plan sounds just like mine. I put the full 10% in and sell right away. It's an easy 15% gain (less taxes). Even when it's high it's worth putting in the full 10% because you get the 15% discount off the best price.

PlainsWalker

  • Stubble
  • **
  • Posts: 101
  • Age: 36
  • Location: Oklahoma City, OK
Re: ESPP with volatile stock
« Reply #5 on: November 03, 2016, 01:49:12 PM »
It seems to me there is really no downside to the ESPP unless it tanks in the few hours between when i buy and sell. I just need to be sure to sell immediately after to minimize risk.

Read your plan documents closely but, in general ESPP's are a fantastic benefit when they are offered. I do sell my shares as soon as possible to limit risk and keep my asset allocation where I want it.

Dansandiego

  • 5 O'Clock Shadow
  • *
  • Posts: 5
Re: ESPP with volatile stock
« Reply #6 on: November 05, 2016, 08:37:47 PM »
I was once told by the CEO of a mid-cap company that she had sold her options before vesting. It took me a while to figure out how she did that (effectively vs. actually). But ever since then I've never let a specific holding period stand in my way of selling or buying (options can offset risk... but I wouldn't use call/out options in any other case.)