The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

July 14, 2009

Employee Stock Purchase Program Review

Filed under: Excel fun, Personal Finance, Real Example — Tags: — thebalancedspreadsheet @ 5:48 pm

 

 

Well as promised, I am posting today about my employer’s Employee Stock Purchase Program (ESPP). Since June 30th, was the last day of the quarter, I want to post a brief synopsis of how the process works.
ESPP Review

ESPP Review

 

 

Before the Quarter ends: Every month $1,667 is taken out of my pay check and is placed into an account with BNY Mellon. The money sits in the account; no interest is accrued, until the last day of the quarter. By then $5,001 is in the account. (Note: since the maximum contribution limit is $20,000 annually, the 4th quarter amount is only $4,997.)

Last business day of the Quarter: Stock is purchased with the $5,001 at 90% (10% discount) of the closing price. This quarter the closing price was $11.66, so the discount rate was $10.494 ($11.66 x .9). I therefore purchased 476.558 shares of stock for the quarter.

Three to five business days after the quarter ends: This is the tricky part. The stock purchased doesn’t post to my account until about 3-5 days after the end of the quarter. Until it posts I am usually checking the market to make sure that stock hasn’t tanked 25% or more, and in these days that might not be far off from the truth. J Naturally there is some fluctuation in the “dead period” when the stock. Sometimes you get lucky and you get a nice capital gain, but other times you the tank drops .20 and you take a capital loss. So far I have not been helped or hurt too bad.

After stock posts to account: I have the option of selling it whenever I choose too. Since I do not believe in single stocks I go ahead and sell as soon as possible. Whenever a sell is put through it always goes the sell price is always the opening price of the stock on the next business day. The stock was first posted to my account on July 6th. I did not put in a request to sell until July 7th and the stock sold on July 8th at $11.79. Not too bad but if I had pulled the trigger sooner I would have sold on July 7th for $11.99. Oh well. I received $5,618.62 from the sale. After taking out my initial investment of $5,001, I netted $617.62 a nice 12.35% before tax return on investment.

Taxes, fees, etc-Unfortunately there are taxes and fees due for selling the stock. The stock gain is broken into two pieces. The discount gain and the capital gain. The discount gain is the closing stock price at time of purchase less the discount price multiplied by the number of shares bought. (($11.66-$10.494)*476.558)=$555.67. The discount gain is taxed at my ordinary income rate. The capital gain is the closing stock price at time of sale less the closing price at the time of purchase multiplied by the number of shares sold. (($11.79-$11.66)*476.558)=$61.95. The capital gain is taxed at my ordinary income rate since it was from an asset owned less then one year. There are also fees with selling the stock. Those amounted to $48.57.

Five to seven days after stock is sold: $5,570.05 or the proceeds after fees from the sale is then deposited into my bank account. Taxes are taken out by my employer in the next pay check. The process then starts over and $1,667 is added each month to my account. So essentially I bank the gains and reinvest the same $5,000 every month. The annual percentage yield (apy) is usually around 45% which is pretty sweet for pretty much doing nothing. So check and see if your employer has something similar. But be careful because all companies’ plans are different and are not all the same. Some have periods where you can not sell and might be forced to keep the stock for longer periods of time.

Anybody else participate in your employers ESPP? How has your experience been? Feel free to comment.

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6 Comments »

  1. […] ESPP-As previously noted, our ESPP account was depleted to buy stock on June 30th.  That stock was sold on July 7th and put into our cash reserves.  The July amount equals one month’s pay that will be used to buy stock at the end of the third quarter. […]

    Pingback by July ‘09 Net Worth update (+9.29%) « Thebalancedspreadsheet's Blog — August 28, 2009 @ 8:51 am

  2. […] ESPP-Nothing new to report here, as another $1,667 was taken out of my paycheck and will be used to buy company stock at the end of the quarter which is September 30th. […]

    Pingback by August ‘09 Net Worth update (+6.96%) « Thebalancedspreadsheet's Blog — September 1, 2009 @ 12:46 pm

  3. […] ESPP-This is a quarter end month.  That means the $5,001 I have in the account will be used to buy company stock which I will turn around the next day and sell at an 11.11% profit!  This will occur during the first week of October, so I will post an update how it goes like last quarter. […]

    Pingback by September ‘09 Net Worth update (+7.66%) « Thebalancedspreadsheet's Blog — October 1, 2009 @ 10:36 am

  4. […] through my employer stock purchase program (ESPP). You can read a review of the process in my 2nd Quarter report. 3rd Quarter '09 […]

    Pingback by Employee Stock Purchase Program 3Q ‘09 « Thebalancedspreadsheet's Blog — October 19, 2009 @ 2:48 pm

  5. […] PDRTJS_settings_702890_post_753 = { "id" : "702890", "unique_id" : "wp-post-753", "title" : "Employee+Stock+Purchase+Program+4Q+%2709", "item_id" : "_post_753", "permalink" : "http%3A%2F%2Fthebalancedspreadsheet.wordpress.com%2F2010%2F01%2F21%2Femployee-stock-purchase-program-4q-09%2F" } The 4th quarter for my employer ended on December 31st.  That means another stock purchase through my employer stock purchase program (ESPP).  You can read a review of the entire process in my 2nd Quarter 2009 report. […]

    Pingback by Employee Stock Purchase Program 4Q ‘09 « The Balanced Spreadsheet-Financial News, Advice, tips, and more — January 21, 2010 @ 11:49 am

  6. […] Employee Stock Purchase Program 1st quarter ‘10 Filed under: Excel fun, Personal Finance, Real Example — Tags: ESPP, Stockmarket — thebalancedspreadsheet @ 8:00 am The 1st quarter for my employer ended on March 31st. That means another stock purchase through my employer stock purchase program (ESPP). You can read a review of the entire process in my 2nd Quarter 2009  report. […]

    Pingback by Employee Stock Purchase Program 1st quarter ‘10 « The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice — April 22, 2010 @ 8:17 am


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