Employee Stock Purchase Plans (ESPPs) at tech companies allow employees to buy company stock at a discounted price, often up to 15% off the market value. Employees contribute through payroll deductions during an offering period, and the accumulated funds are used to purchase shares on the purchase date.
Many ESPPs include a “look-back” feature, which bases the purchase price on the stock’s value at the start or end of the offering period—whichever is lower. While ESPPs can be a great wealth-building tool, it’s important to consider tax implications and avoid over-concentration in company stock to manage risk effectively.
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