Today, Employee Stock Option Plans (ESOPs) are an integral part of executive compensation. ESOPs are now spread across the IT, services and manufacturing sector. Such stock based compensation involves granting some ownership stake in the company to its employees hence synergizing interests of the employees and the company.
Though increasing ownership in the company, it puts “a lot of eggs in one basket”. While you may be justifiably proud of your ownership in your company and like to see it grow as you work hard, holding a concentrated position in a single stock comes along with an opportunity cost and liquidity risk. The performance of your wealth is dependent on various factors, not the least being how the industry shapes up and how the market values the stock. As you keep working with your company, your intellectual capital (technically speaking, the present value of all your future earnings from the company) still remains tied in with the fortunes of your enterprise. Hence, it may be a wise idea to appropriately distinguish between your intellectual capital and financial capital and manage them according to the risk-return parameters inherent in them.
As you begin to think about managing from your concentrated exposure, you will need access to independent and well researched advice on strategy (whether to use futures and options, what quantum to bring into play), low-cost financing for the exercise, compliance timings (to avoid insider trading) and a carefully planned diversification strategy. At Karvy Private Wealth, we have the best in class team to assist you in all aspects of managing your ESOPs.
Who is this suitable for?
- Employees receiving ESOPs as a part of their compensation package
What does it cover?
- Advising the client on the current holding (ESOPs) and suggesting the strategy to be followed regarding exercising of the options held.
- The necessary financing for a cashless exercise of options would be provided, at a competitive rate, ensuring sufficient liquidity with the client.
- We would ensure that the process of exercising these options is smooth and quick.
- We would recommend a diversification strategy for your current holding and ensure its smooth execution.
