Welcome to the 16th edition of the Tech Financial Planning (TFP) newsletter.
I wrote last week about my two favorite ways for tech employees to get free money.
One of them is your company ESPP, and this week is a great case study of how ESPP’s can work in your favor.
Procore employee’s just got a whopping 44.1% return on their most recent ESPP purchase
Let’s dive in
TL;DR
An ESPP with a lookback and a discount is a huge opportunity
Procore employees just got a 44.1% return for the period from May 16 - November 15
Depending on how much you contribute, this could be thousands of dollars of “free” money
The Procore ESPP
Procore’s plan has two important provisions: a lookback and a discount.
With the lookback, the purchase price is the lower of the grant date (beginning of the period) or the purchase date (end of the period).
With the discount, Procore employees get 15% off the purchase price.
Put these two together and it’s a great combo.
Buying shares for $17.69 off
This period started on May 16, and on that date Procore was trading at $47.19.
When the period ended on November 15, Procore was trading at $57.80.
So with the lookback, Procore employees get 15% off the lower of the two prices!
In this case, that would be the $47.19 on May 16.
Which means they get to buy shares for $40.11.
Purchase price = $47.19 * .85
Purchase price = $40.11
Let’s put this another way.
Procore employees got to buy shares that were worth $57.80 for the low low price of $40.11.
That’s a savings of $17.69 a share!
And an instant return of 44.1%
So What does this mean?
During the last 6 months, this Procore employee put a little over $4,100 into the ESPP program through payroll deductions.
This bought them 103 shares for $4,131.33
103 shares x $40.11 purchase price = $4,131.33
Those shares were immediately worth $5,953.40.
103 shares x $57.80 current price = $5,953.40
That’s an instant gain of $1,822.07
$5,953.40 - $4,131.33 = $1,822.07
$1,822.07 of free money
what’s your plan for these Shares?
That gain isn’t guaranteed
You only locked in that gain if you sold immediately (tbh, easier said than done).
Because over the next few days, Procore’s stock dropped.
At the close of trading on Friday, November 18th, Procore was trading at $50.31 / share.
Those same 103 shares are now worth $5,181.93.
Still a lot higher than the $4,131.33 that they were bought for, but a sizable drop from the $5,953.40 they were worth a few days ago.
Putting It All Together
If you have an ESPP with a lookback and a discount, you should be taking advantage of it.
There’s very few situations where you wouldn’t.
The upside is a minimum of 17.6%, but it can also be a lot more.
If you aren’t, you’re likely leaving a lot of free money on the table.
Make sure you have a plan.
It’s easy to let your company stock become a massive part of your portfolio, especially with sweet programs like an ESPP.
If you need help, I’d love to talk.
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