Author Topic: Not sure what to do with ESPP shares.  (Read 3397 times)

ncornilsen

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Not sure what to do with ESPP shares.
« on: January 22, 2015, 11:38:17 AM »
I maxed out my ESPP plan for 2014, and it didn't go to well TBH. The plan was for the stock PCP, and I ended up with 41ish shares of it. I sold 4 to finish maxing my 2014 HSA.

So I have 37ish shares left, at ~$210. ($7800 value.) 

I have $4500 of debt on a 0% card that's good 'till june 2016. ($45/mo)
I owe $7000 on my car, at 1.95% interest.  ($140/mo)
I have $3500 of room in my 2014 roth.

I have $3800 in cash savings in a 1% savings account, and like $35,000 of room on various credit cards.

It seems like the best option is sell it all off, max my Roth for 2014, HSA for 2015, and maybe make a dent in the motorcycle.  It would be kind of nice to kill off the motorcycle loan though, and free up the cashflow... though at 2%, its not like it's a huge interest drain.

Or, I could let it ride, I suppose, but I'm not sure what PCP is going to do during the next year. And I'm continuing to invest heavily in the ESPP.

seattlecyclone

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Re: Not sure what to do with ESPP shares.
« Reply #1 on: January 22, 2015, 11:50:37 AM »
How does your plan work? Do you get discounts on the shares? Is there any restriction on selling the shares right away? These plans can be a good way to get extra income if there's a discount, but tying up too much of your net worth in one stock (particularly your employer's stock) is a risky thing. I recommend selling the shares immediately. Fill up your 2014 Roth, then maybe get started on your 2015 Roth contributions. The debt isn't urgent right now, just make sure you have enough cash to pay off the credit card before the promo rate expires next summer.

ncornilsen

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Re: Not sure what to do with ESPP shares.
« Reply #2 on: January 22, 2015, 12:16:54 PM »
They offer a 15% discount on the lower of the price on Jan 1 of a plan year, or Dec 31 of a plan year. It was ~270 on Jan 1, dropped to $240 on Dec 31. So my price, after discount, was $204.75

I can sell them immediately, however fidelity or the company doesn't settle the trade in your account until the middle of January... in which time the price dropped to 220. I sold 4 shares to have enough to max my 2014 HSA contributions before I do my taxes.   The price then dropped further to $186!

Now its back to $210ish.  Oil production equipment/tubing is about 25% of the company's business, so I don't see the stock price recovering much for the next year.

I unloaded 22 shares at $212 this morning... the rest have a limit, GTC, at $220 incase it spikes. I was going to change it so all sold at $212, but it went up from $211 to $212.25 in the time it took me to log in!

At any rate, all that matters is that my cost basis is $204.75, and I have control to sell them at any time.
« Last Edit: January 22, 2015, 12:18:54 PM by ncornilsen »

seattlecyclone

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Re: Not sure what to do with ESPP shares.
« Reply #3 on: January 22, 2015, 12:44:32 PM »
At any rate, all that matters is that my cost basis is $204.75...

Not quite right. If you sell before the "holding period" expires at the end of this year, your cost basis will be the same as the value of the stock on the purchase date ($240/share). The difference between your purchase price and the value ($35.25/share) should be reported as earned income on your W-2 (you may have to tell your employer about the stock transaction to make sure they do this right, if the broker doesn't notify them). Any sales under $240 will then count as a capital loss.

See this post for more info.

RapmasterD

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Re: Not sure what to do with ESPP shares.
« Reply #4 on: January 22, 2015, 01:00:01 PM »
They offer a 15% discount on the lower of the price on Jan 1 of a plan year, or Dec 31 of a plan year. It was ~270 on Jan 1, dropped to $240 on Dec 31. So my price, after discount, was $204.75

I can sell them immediately, however fidelity or the company doesn't settle the trade in your account until the middle of January... in which time the price dropped to 220. I sold 4 shares to have enough to max my 2014 HSA contributions before I do my taxes.   The price then dropped further to $186!

Now its back to $210ish.  Oil production equipment/tubing is about 25% of the company's business, so I don't see the stock price recovering much for the next year.

I unloaded 22 shares at $212 this morning... the rest have a limit, GTC, at $220 incase it spikes. I was going to change it so all sold at $212, but it went up from $211 to $212.25 in the time it took me to log in!

At any rate, all that matters is that my cost basis is $204.75, and I have control to sell them at any time.

If your employer's plan offers a "quick sale" or "quick sell" option, the transaction should happen exactly on the date you specify, which you typically do in advance. If your employer's plan doesn't offer this option.......well, I wouldn't personally invest in it because I've rarely wanted to become an ongoing equity investor in my employer's shares. Sweat equity? Yes. Availing myself of a pretty much guaranteed return through an ESPP? Yes. Not being able to control, in advance, when I can sell ESPP shares, i.e., the day they become available to trade? Not for me, anyway.

ncornilsen

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Re: Not sure what to do with ESPP shares.
« Reply #5 on: January 22, 2015, 01:24:59 PM »
At any rate, all that matters is that my cost basis is $204.75...

Not quite right. If you sell before the "holding period" expires at the end of this year, your cost basis will be the same as the value of the stock on the purchase date ($240/share). The difference between your purchase price and the value ($35.25/share) should be reported as earned income on your W-2 (you may have to tell your employer about the stock transaction to make sure they do this right, if the broker doesn't notify them). Any sales under $240 will then count as a capital loss.


See this post for more info.

You are correct. I did oversimplify a bit!