What is an ESPP?
Employee Stock Purchase Plans are an interesting form of compensation offered by some companies which allows participants to purchase company stock at a discount to market price. A common purchase discount is 15% of the market value on the either of two days: The first day money is locked up (known as the ‘lookback’ date) of a 6-month period, and the last day of the cycle. Two 6-month cycles make up the average ESPP, and each cycle locks up your money for the entirety of that period. How does that translate to the bottom line? Say a person is making $100,000 a year – $90,000 in base pay and $10,000 in bonuses. They can contribute up to 10%, or $10,000 into the ESPP. Base Pay: $90,000 Bonus Pay: $10,000 ESPP Contribution: -$10,000 ___________________________ Net Cash (Pre-Tax) $90,000 Say the price of stock on the 20th is $20.00 a share. If the price stays steady until February: 588 shares purchased, market value $11,760 If the price declines to $15.00 a share: 784 Shares purchased, mar
Related Questions
- How will I be able to reconcile my former class A preferred stock account balance to my new common stock and/or ESPP account balance after the reclassification?
- What new functionality will be available with the new Employee Stock Purchase application with respect to the sale of ESPP shares after the reclassification?
- How will the reclassification affect the Employee Stock Purchase Plan (ESPP)?
