ESPP: Are Employee Stock Purchase Plans Worth It?


An ESPP, or Employee Stock Purchase Plan, is a benefit some public companies offer to their employees. It allows employees to purchase company stock at a discounted price.

Let us tackle the factors which make ESPP a valuable perk and whether or not you should participate.

What Is an Employee Stock Purchasing Plan (ESSP)?


An ESSP allows you to buy your company’s stock at a discounted value, usually around 5-15% of the fair market price.

For example, if your company stock is trading at $100, and the plan discount is 15%, you will receive stocks at $85. If your company has an ESPP, you can buy stock and potentially sell it for a 15% guaranteed profit immediately.

How Does an ESPP Work?


Scenario 1

If the company stock is trading at $100 on Jan 1st and trading at $110 on Jun 30th, you will receive the stock at $85 on Jul 1st. As a result of the favorable lookback period, your profit is $110-$85 = $25 per stock, which is more than 15%.

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