ESPP Share Limits and the Valuation Impact


Ignoring share limits can increase your compensation expense. In ESPP Valuation: 4 Missing Pieces, we highlighted several potential reductions to the valuation of an ESPP share under ASC718. In this brief, we will provide more granular detail on share limitations, specifically focused on: We will provide more specific detail on when the reduction may become…

ESPP Accounting 101


Everything you want to know about how to account for ESPPs. Under ASC 718, compensation expense for employee stock purchase plans (“ESPPs”) must be recognized in a company’s financial statements.  The only exception is a plan that is considered “non-compensatory” – which means it does not contain a look-back feature nor have a discount over…

What You Should Know About Rising Interest Rates and Your ESPP


As interest rates increase, companies should optimize ESPP valuation by reducing fair value for interest foregone. Most experts anticipate that the United States will continue to increase interest rates during 2022. Over the last 20 years, interest rates have been historically low. The picture below illustrates the last 40 years for the 6-Month Treasury Rates.…

How to Calculate Volatility Using VWAP Price


VWAP Volatility Infinite Equity’s new approach to calculating historical volatility is to use Volume Weighted Average Prices (VWAPs).  The merits of using this approach can be found in our Research Brief, A New Way to Estimate Volatility.  The intent of this addendum is to illustrate how to calculate volatility using VWAP prices. Before we get…

A New Way to Estimate Volatility


VWAP Volatility. Developing volatility assumptions is a common practice in the financial community, where many sophisticated techniques have been developed that go beyond simply calculating volatilities based on historical stock prices. The Black-Scholes, Monte Carlo, and lattice models all use a volatility input, which may come from a variety of sources. For example, the use…

ESPP Valuation – 4 Missing Pieces


You may be overvaluing your ESPP expense. Current Market Practice ESPPs are valued based on their plan design features, which frequently results in multiple components to estimate the fair value. The accounting requirements under ASC Topic 718 point to guidance from FTB 97-1: Accounting under Statement 123 for Certain Employee Stock Purchase Plans with a…

Counting the Costs and Balancing the Benefits


Financial Engineering for ESPPs. Fidelity Investments and Infinite Equity teamed up to explore how ESPP elements fit together to help companies engineer a plan to manage financial implications and deliver balanced benefits.

“Cadillac” ESPP Considerations: What You Need to Know Before Adopting


Balance this exceptional employee benefit with compliance and administrative ease. Introduction Employee Stock Purchase Plans (ESPPs) are common among public companies, and it is easy to see why. On the participant side, ESPPs allow a large population of employees to build wealth through the purchase of company stock, typically at a discount to the market…

The Case for an ESPP at IPO


A unique opportunity to ensure an ongoing ownership culture. 2021 has been a banner year for IPOs, and particularly for companies going public via a special-purpose acquisition company (“SPAC”). Expectations were high coming into the year, as companies prolonged the decision to go public during the pandemic, but have dramatically bounced back. This, coupled with…

Compliance Requirements for Changes to Volatility Methodologies


VWAP Volatility Infinite Equity is introducing innovative new thought leadership on the financial theory around determining historical volatility for purposes of ASC718. Introduced in the Research Brief, A New Way to Estimate Volatility, and published collectively at In this article, we provide guidance for companies who decide to change their methodology to VWAP volatility. …