Is the ESPP discount profit?
The difference is ordinary income. If the price drops and you sell for exactly what you paid, you have an income of D and a capital loss of D which usually cancel each other, but not always. For example, if you already have over $3000 in losses, this loss won't help you, it will carry forward.  The above changes a bit if you hold the stock for 2 years after the beginning of the purchase period. If sold between your purchase price and fair market the day you bought, the gain is only the difference, no gain to fair market + loss.   Pretty convoluted. Your company should have provided you with a brief FAQ / Q&A to explain this.  My friends at Fairmark have an article that explains the ESPP process clearly, Tax Reporting for Qualifying Dispositions of ESPP Shares.
No, it is the same as it has always been. The market gives a valuation of a company based off its expected discounted cash flow.   Only problem we see is that many growth companies ($TSLA!!!) are being given the benefit of the doubt in regards to their expected growth and future profitability. **IF** Tesla does grow as many expect, then current share prices are definitely justifiable. But since when do we price things based on their ideal scenario? This market has lost its grip on risk-reward and risk tolerance. Does even a Tesla bull think that the company even has a &gt;10% chance at ever exceeding expectations in regards to near-future growth or profitability? And even those who are invested in the company admit there is a serious chance that Tesla fails to reach expectations for growth/margins.  Either way the market will cool soon. And negative cash flow companies with ultra-aggressive growth targets will be punished.  ---  If I wasn't poor/saving up to buy a house. I'd love to purchase 100 [January 2019 $50 Put Leaps at a cost of $0.55 each](http://www.nasdaq.com/symbol/tsla/option-chain/190118P00050000-tsla-put) (total cost $5,500).  A Tesla BK before January 18th 2019 would mean $50x100x100 - $5,500 = **$494,500** net profit WOW.  A reduction in market cap to $5 Billion and increase in outstanding shares to 200 million (currently at 167M) results in a net profit of **$244,500**  A reduction in market cap to $10 Billion with the same share dilution results in share price of $50 and thus a full loss of my $5,500. :( It says Amazon has no profits (or very low profits) but the value of the company is very high and growing because of the high revenue. All of the returns to investors are in the form of increased share price which isn't realized or taxed until the shares are sold. This isn't a loophole. Anybody can run a business where they spend most of their revenue on operating costs and run on very slim margins with the goal of growing the revenue. No can't make quick bucks. It depends very much on what the strike price was. Dividends which are below 10% of the market value of the underlying   stock, would be deemed to be ordinary dividends and no adjustment in   the Strike Price would be made for ordinary dividends. For   extra-ordinary dividends, above 10% of the market value of the   underlying security, the Strike Price would be adjusted. Refer more at NSE India Edit: The Nifty consists of 50 stocks. The largest one has weight of around 8%. So 10% on this will only translate to .8% on index. Greetings r/finance!! I have a question regarding EBIT and the company that I work for.   The steel company I work for reported they made a profit of $1.3 billion profit. Here's the link with some more numbers:  http://www.nwitimes.com/business/local/arcelormittal-turns-billion-profit-in-second-quarter/article_606a0989-066f-5140-864d-2b04e5f4f294.html  Now I am a union worker and like everyone else in my union, we get a profit sharing check based on the company's profit and with the labor agreement we have with them we get a 7.5% cut of it.   So my question for you guys why did we recieve this piece of paper today?  https://imgur.com/gallery/pSIG3  Why is there still a $33 million dollar loss that we don't get any profit sharing?? Any and all answers or information is appreciated. Thank you for your time in advance! Employee Stock Purchase Plans (ESPPs) were heavily neutered by U.S. tax laws a few years ago, and many companies have cut them way back. While discounts of 15% were common a decade ago, now a company can only offer negligible discounts of 5% or less (tax free), and you can just as easily get that from fluctuations in the market. These are the features to look for to determine if the ESPP is even worth the effort: As for a cash value, if a plan has at least one of those features, (and you believe the stock has real long term value), you still have to determine how much of your money you can afford to divert into stock. If the discount is 5%, the company is paying you an extra 5% on the money you put into the plan. generally Forward P/E is computed as current price / forward earnings.  The rationale behind this is that buying the stock costs you the current price, and it gives you a claim on the future earnings. "I don't think they ""actually"" turned a profit, did they?  As I understand it, this is an accounting method/trick, it's not as if they generated more income by using this system.  They just made their monetary value visible rather than implicit.  Which is not the same as turning a profit... or am I missing something?" "No, but you can better see who is making that profit possible.  I've worked for companies where some divisions were making a profit according to their books. But when you take into account the resources they were consuming, especially IT, they were really operating at a loss.  In the case of IT I don't think its beneficial to ""make a profit"", but they should at least charge the other departments their cost just so you can see how those other departments are impacting the company as a whole." The typical deal is you can put 10% of your gross pay into the ESPP. The purchase will occur on the last deposit date, usually a 6 month period, at a 15% discount to the market price.  So, the math is something like this: Your return if sold the day it's purchased is not 15%, it's 100/85 or 17.6%. Minor nitpick on my part, I suppose.  Also the return is not a 6 month return, as the weekly or bi-weekly deductions are the average between the oldest (6 mo) and the most recent (uh, zero time, maybe a week.) This is closer to 3 months. The annualized rate is actually pretty meaningless since you don't have 4 opportunities to achieve this return, it's important only if the cash flow hit causes you to borrow to support the ESPP purchases. The risk is whether the stock drops the 15% before you can execute the sell to take advantage of the gain.  Of course the return is gross, you need to net for taxes.  Edit to respond to comment below - When I said meaningless, I meant that you can't take the 17.6%, annualize it to 91.2% per year and think your $1000 will compound to $1912. It's as meaningless as when an investor gets a 10% gain on a stock in one day, and (with 250 trading days per year) decides his $1000 will be worth $2 quadrillion dollars after a year. The 17.6% is significant in that it's available twice per year, for a true 38% return over a year, but if borrowing to help the cash flow, that rate is really over 3 months. I feel like IRR is the tool you want to use for this, then you can look at your output and determine if it's higher than what your discount rate is likely to be.  Similarly, you can just do a traditional NPV analysis and then examine the sensitivity by changing the discount rate. If you're safely in profitable territory then you're probably fine despite not knowing the discount rate. No, this is misbehavior of sales software that tries to automatically find the price point which maximizes profit. There have been much worse examples. Ignore it. The robot will eventually see that no sales occurred and try a more reasonable price. Theoretically IRP works, in practice is a whole new game... I've been longing EURCHF leveraged up at the floor and collecting the rate differential.  When the ECB cuts rates i'll close the trade...  These are called carry trades and more commonly done right now with bonds. Of course, this calculation does not take into consideration the fact that once the rights are issues, the price of the shares will drop. Usually this drop corresponds to the discount. Therefore, if a rights issue is done correctly share price before issuance-discount=share price after issuance. In this result, noone's wealth changes because shareholders can then sell their stock and get back anything they had to put in. In many ESPP programs (i.e. every one I've had the opportunity to be a part of in my career), your purchase is at a discount from the lower of the stock prices at the start and end of the period. So a before-tax 5% return is the minimum you should expect; if the price of the stock appreciates between July 1 and December 31, you benefit from that gain as well. More concretely: Stock closes at $10/share on July 1, and $11/share on December 31. The plan buys for you at $9.50/share. If you sell immediately, you clear $1.50/share in profit, or a nearly 16% pre-tax gain. If the price declines instead of increases, though, you still see that 5% guaranteed profit. Combine that with the fact that you're contributing every paycheck, not all at once at the start, and your implied annual rate of return starts to look pretty good. So if it was me, I'd pay the minimum on the student loan and put the excess into the ESPP. Since you work there, you may have some home bias. You should treat that as any other stock. I sell my ESPP stocks periodically to reduce the over allocation of my portfolio while I keep my ESOP for longer periods.