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Deciding whether "redeeming" or "recirculating" shares is better for us

In recent years, many advisors have been recommending that ESOP sponsors manage their ESOPs by limiting contributions to an "appropriate" benefit level , recirculating ("recycling") shares only up to that amount, and handling repurchase obligations excess of that amount by redeeming shares. But redemptions affect the share value trajectory and may have unintended or undesirable consequences. For example, redemptions will cause the value per share of the plan sponsor's stock to grow faster than the underlying value of the company. This can create confusion if the company's financial performance is communicated to employees through the share value. It also affects how different constituencies within the company are affected, for example by affecting the value of synthetic equity programs.

The question of whether to redeem or recirculate, and in what amounts, can be answered through modeling that gives you visibility of the consequences so you can make informed decisions.

Our Telescope™ software combined with our financial modeling capabilities uniquely positions us to help you resolve the "redeem vs. recirculate" question by quantifying the implications of each. A brief fact-finding telephone conversation will allow us to estimate the cost and prepare a proposal for you.

Contact us at 215.606.3600 or info@esopeconomics.com