I never understood why people don't do the max amount of their ESPP. Even if you have little faith in the company, if you sell right away you still will turn a 8-9% profit.

Example:
Jan2016 market price: $30/share
July2016 market price: $24/share
6 month withholdings (note: this is post-tax): $5000
Grant price: $24 x 0.85 = $20.40/share
Granted: 245 shares on July 1st 2016.
Sell immediately at $24/share....
245 shares x $24 = $5880
Pay short term gains tax (ordinary income) on $880 profit/benefit
~25% x $880 = 220$ in taxes
NET 6 MONTHS GAIN AFTER TAXES IS $660!

Only way you would possibly get burned is if that in that small time frame after the stock is purchased and before it is processed into your account, the stock price drops significantly. My experience is that this period is typically only 1.5-2.5 weeks.

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Posted by Alahunter

Member since Jan 2008

90739 posts

Posted on 9/1/16 at 9:44 am to KingofZydeco

quote:
never understood why people don't do the max amount of their ESPP. Even if you have little faith in the company, if you sell right away you still will turn a 8-9% profit.

That's what I started doing in 2014, with the maxing out. I work PT for Home Depot and they have an Employee stock purchase plan. I deduct 20% (max) of my check for it. At the end of six months they do a stock purchase at 15% below market. I haven't sold it, just forgetting it and letting it accumulate. My first buy was around $69 a share and it's been over $130 a share for awhile now. Last purchase in June was $108 a share, so made an instant 27 bucks a share if I had sold, but like I said.. just accumulating shares and reinvesting the dividends for now.

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