More Employees Using Company Stock as a Flexible Finance Tool, Fidelity Study Finds

BOSTON--()--An increasing percentage of workers who purchase company stock through their Employee Stock Purchase Program (ESPP) are leveraging this workplace benefit by selling shares, potentially taking advantage of favorable stock market conditions, according to research by Fidelity Investments®. Those most likely to sell their shares are employees under 40 years old or those who get a significant discount on company stock purchased through their ESPP. The findings are based on a Fidelity analysis1 of more than 365,000 workers over a three-year period to learn how employees handled company stock purchased through their ESPP. ESPPs give rank-and-file employees the opportunity to apply part of their paycheck toward the purchase of company stock, often offered at a discounted price.

“Company stock plans are increasingly viewed as a top2 employee benefit and can play an important role in an employee’s overall financial health,” said Mark Haggerty, Head of Stock Plan Services at Fidelity Investments. “Employees often use these plans as a savings vehicle alongside their 401(k), but money from an ESPP can be used to address short-term expenses and financial needs and help workers avoid the need to tap their 401(k).”

The analysis examined whether employees held the stock for the three-year period, sold their shares at some point, or sold part of their company stock and kept the rest. Fidelity compared the findings to similar research3 from 2014 and discovered the following:

  • Market conditions increase selling behavior. The percentage of employees who sold all their shares over the three-year period increased to 50 percent, compared to 48 percent in 2015. The percentage of employees who held all of their shares dropped to 43 percent, down one percentage point from 2014.
  • Employees with a higher discount are more likely to sell. A higher discount rate generally drives higher participation among employees, and plans with a 15 percent discount have twice the participation rates than plans with lower discounts. Among workers who were offered company stock at a 15 percent discount, the percentage of employees who sold all their stock (51 percent) was 10 percentage points higher than the portion of employees who held all the stock they acquired (41 percent).
  • Older employees demonstrate increased selling behavior. Overall, older employees continued to demonstrate higher holding behavior compared to younger employees. However, the percentage of workers between 50 and 60 years old who sold all their company stock increased to 44 percent, up from 41 percent in 2014. Among employees 60 years or older, the percentage who sold all their stock increased to 38 percent, up from 34 percent in 2014.
  • The more employees contribute to their ESPP, the more likely they are to sell the shares they acquire. Among workers who contributed $10,000 or more to their ESPP per year, 57 percent sold all their shares, an increase from 52 percent in 2014.

Workers often use proceeds from the sale of company stock to pay debt, invest in real estate

Fidelity recently4 conducted a survey to determine how workers use the proceeds from the sale of company stock purchased through their ESPP. Rather than spending the proceeds on luxury items or expensive vacations, the survey found that many workers used the money from their ESPP for more practical purposes, such as paying down debt (34 percent), home improvement and real estate (17 percent) and establishing an emergency fund (11 percent). In addition, almost a fifth (19 percent) of workers surveyed re-invested the proceeds from an ESPP sale in either a mutual fund or their retirement savings account.

“Company stock can be a great tool to help employees address a variety of financial needs,” added Haggerty. “When you consider the role company stock can play in a financial wellness program and combine that with the positive market performance over the last few years, it’s not surprising to see an increasing percentage of workers realizing the benefit of company stock as part of their overall financial plans.”

About Fidelity Investments
Fidelity’s mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $5.8 trillion, including managed assets of $2.2 trillion as of January 31, 2017, we focus on meeting the unique needs of a diverse set of customers: helping more than 26 million people invest their own life savings, 23,000 businesses manage employee benefit programs, as well as providing more than 12,500 financial advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

Diversification/asset allocation does not ensure a profit or guarantee against loss.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.
500 Salem St., Smithfield, RI 02917

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© 2017 FMR LLC. All rights reserved.

1 Fidelity analysis of more than 365,000 employees at 119 Fidelity clients that completed an ESPP share purchase in 2013. Employee behavior was measured as of June 2016.
2 Based on a survey conducted for Fidelity by CMI of 2,114 stock plan participants, both US (total: 1,369) and international (total: 745). CMI sent invitations and up to two reminders between March 14 and April 13, 2016. Surveys were collected through April 22, 2016.
3 Fidelity analysis of more than 330,000 employees at 105 Fidelity clients that completed an ESPP share purchase in 2012. Employee behavior was measured as of December, 2014.
4 Based on a survey conducted for Fidelity by CMI of 2,114 stock plan participants, both US (total: 1,369) and international (total: 745). CMI sent invitations and up to two reminders between March 14 and April 13, 2016. Surveys were collected through April 22, 2016.

Contacts

Fidelity Investments
Mike Shamrell, 617-563-1996
Michael.shamrell@fmr.com
or
Corporate Communications, 617-563-5800
Follow us on Twitter @FidelityNews
fidelitycorporateaffairs@fmr.com

Release Summary

Fidelity analysis examines what workers do with company stock they acquire through their Employee Stock Purchase Plan (ESPP).

Contacts

Fidelity Investments
Mike Shamrell, 617-563-1996
Michael.shamrell@fmr.com
or
Corporate Communications, 617-563-5800
Follow us on Twitter @FidelityNews
fidelitycorporateaffairs@fmr.com