Company Stock Purchase Plan
 

Hello all,

Longtime lurker with a great respect for many of the posters on this board here, and I've got a question about my company's employee stock purchase plan that I hope someone can help me with.

I'm beginning a new job on Monday that will let me purchase company stock at a 15% discount from the stock's market value on the last business day of each month. I have to hold onto the shares for one year before I am able to sell.

I am not sure about how great a longterm investment my new company is (it could be great, it could be poor; I am in the process of teaching myself how to value companies and am confident I will be able to do so reasonably well by this time next year, so I can make an informed decision about whether to hold or sell when I become eligible to do so), so my question is what percentage of my paycheck should I be allocating towards the stock purchase plan? 0% since I really shouldn't be investing in a company without knowing which direction it will likely head? 10% maybe? As much as possible since the stock would have to fall > 15% before I lose money?

Any help's appreciated.

Re: Company Stock Purchase Plan
 

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As much as possible since the stock would have to fall > 15% before I lose money

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gogogogogogogo

Re: Company Stock Purchase Plan
 

Short it in a brokerage account, 15% arbitrage.

Re: Company Stock Purchase Plan
 

[ QUOTE ]
Short it in a brokerage account, 15% arbitrage.

[/ QUOTE ]

Either this or buying put options would be ideal but the commissions would probably be overly expensive for the small amounts of stock in question here.

You should buy as much as you can and sell as soon as possible. You're exposing yourself to a bit of risk but it's definitely going to be +EV unless the management are crooks.

Re: Company Stock Purchase Plan
 

[ QUOTE ]
[ QUOTE ]
Short it in a brokerage account, 15% arbitrage.

[/ QUOTE ]

Either this or buying put options would be ideal but the commissions would probably be overly expensive for the small amounts of stock in question here.

You should buy as much as you can and sell as soon as possible. You're exposing yourself to a bit of risk but it's definitely going to be +EV unless the management are crooks.

[/ QUOTE ]

would transactions costs really eat away so much of the profit that it wouldn't be worthwhile to lock in this profit?

also, i assume it's completely within the rules to setup this short in this situation?

tc

Re: Company Stock Purchase Plan
 

[ QUOTE ]
[ QUOTE ]
Short it in a brokerage account, 15% arbitrage.

[/ QUOTE ]

Either this or buying put options would be ideal but the commissions would probably be overly expensive for the small amounts of stock in question here.

[/ QUOTE ]

zecco.com

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You should buy as much as you can and sell as soon as possible. You're exposing yourself to a bit of risk but it's definitely going to be +EV unless the management are crooks.

[/ QUOTE ]

Read the OP. He has to keep it for a year.

Re: Company Stock Purchase Plan
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Short it in a brokerage account, 15% arbitrage.

[/ QUOTE ]

Either this or buying put options would be ideal but the commissions would probably be overly expensive for the small amounts of stock in question here.

You should buy as much as you can and sell as soon as possible. You're exposing yourself to a bit of risk but it's definitely going to be +EV unless the management are crooks.

[/ QUOTE ]

would transactions costs really eat away so much of the profit that it wouldn't be worthwhile to lock in this profit?

also, i assume it's completely within the rules to setup this short in this situation?

tc

[/ QUOTE ]

That's something he should certainly check. I made my comment sort of off the cuff. I've heard of companies that prohibit this sort of shorting in the company stock. Every time I've been in an ESPP there have been no restrictions.

Re: Company Stock Purchase Plan
 

So it looks like consensus is to short the company stock if possible, and if it is not (I am not sure at this point), to plow as much money as possible into it. Makes sense to me. Thanks for the advice, guys.

Re: Company Stock Purchase Plan
 

Yikes, that was not a consensus, just my one big mouth. Talk to other people at the company that have been there for awhile and get their opinions. Do NOT tell them you are thinking of shorting the stock.