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If your company offers an employee stock purchase plan, chances are you prepare a report for your management team after each purchase, to summarize the purchase and the status of the plan. Here are five things to include in your report:
1. Total Shares Purchased and Price: This probably goes without saying, but of course your report to management should include the total shares that were purchased and the total price paid by employees (i.e., cash flowing into the company) for those shares.
2. Participation Rate: Your report should also include the percentage of eligible employees who participated in the purchase. It’s helpful for management to know how many employees participate and how participation rates change over time.
3. Total Gain: The total gain on the purchase (i.e., the purchase date FMV less the purchase price, multiplied by the number of shares purchased). This figure quantifies the benefit delivered to employees under the plan. Savvy administrators might also compare this gain to the amount of cost recognized for the purchase period.
4. Shares Sold vs. Held: Assuming you can get this data from your broker in time, the report might also include how many shares were immediately sold by employees vs. how many shares have been held. And you might include broader data on sales for the plan, such as the amount of time, on average, that employees hold the stock acquired under the ESPP or the percentage of total shares acquired under the plan (e.g., since its inception or looking back several years) that are still held by employees and were sold in qualifying or disqualifying dispositions.
5. Shares Available: For planning purposes, the report should also include the number of shares that remain available for future purchases. If this number is running low, it’s time to start thinking about requesting more shares for the plan.
If you’re interested in learning all about ESPPs, be sure to attend ESPP Day, presented by Computershare in partnership with Baker McKenzie. Don’t miss my session, ESPP Fundamentals: ABCs of ESPPs!
ESPP Day will be held on Nov. 8, 2018 in San Jose, CA. Register with my personal code, BAKSA15OFF, and you’ll receive a 15% discount on the regular $199 registration rate.
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