SkyWest Employee Stock Purchase Program and 401K

[AV8700]

Wellllll...NO.

It might work differently on the SKYW side of the house. Although the ASA version does allow you to 'change' the % (and therefore, cancel contributions) at any time, the changes will only take affect at the purchase time, either 1 Jan or 1 July. So even though you can request the change through 'Computershare' (something tells me this was the lowest cost provider of this service...) at any time, the change will not be made until the end of the 6 month period.

The changes will not touch any amount purchased during the 1 July 08/1 Jan 09 time frame. However, the 1 Jan 09/1 July 09 time frame will now be limited to only a 5% discount from the closing share price at the end of the period.

The value to the ASA/SKYW employee has been dramatically reduced.

I think the plans are the same. I just changed and decided not to participate for the next 6 month period. THere also was an option to cancel out of this 6 months and get the money back. Don't know why anyone would do that begining price was around $10.75 (after the 15%). It was a great program, not many companies out there offering over 5%.

 

[crj567]

Andy, your calculations are indeed incorrect, or at best-misleading......

5% discount is a 5% discount... It does not matter when it takes place. You are calculating this as though the return is additive, but it is not. You get 5% return for the first six months and a separate 5% return on the second six months-these are separate accounts.

These accounts are not co-mingled, so they are not addative-the second 5% DOES NOT piggback on the first 5%. It starts all over.

You are mis-applying the concept of "dollar-cost-averaging," in effect-you are compounding the 5% a few times more than it actually can be.

 

[Andy Neill]

Andy, your calculations are indeed incorrect, or at best-misleading......

5% discount is a 5% discount... It does not matter when it takes place. You are calculating this as though the return is additive, but it is not. You get 5% return for the first six months and a separate 5% return on the second six months-these are separate accounts.

These accounts are not co-mingled, so they are not addative-the second 5% DOES NOT piggback on the first 5%. It starts all over.

You are mis-applying the concept of "dollar-cost-averaging," in effect-you are compounding the 5% a few times more than it actually can be.

You are absolutely right. Please disregard my uninformed drivel. I am in the presence of financial genii.

 

[SkyNation]

Andy

you do realize that we only get 5% off the price the last day of the period, instead of the lower of the two days as was previously done? with the stock price moving that much and more day to day, up and down, I think people are saying that it's not worth the risk that you'll time it just right and sell like so many of us do. right?

 

[Andy Neill]

Sky,
Answer one excruciatingly simple question.

What would the APY need to be for a savings account that could deliver the $68.42 in interest from bi-weekly contributions of $100 over a six month period?

I maintain that is in the neighborhood of 21%. Most of you seem to think it is in the neighborhood of 5%. What do you think?

 

[MONKEY]

Sky,
Answer one excruciatingly simple question.

What would the APY need to be for a savings account that could deliver the $68.42 in interest from bi-weekly contributions of $100 over a six month period?

I maintain that is in the neighborhood of 21%. Most of you seem to think it is in the neighborhood of 5%. What do you think?

Andy is comparing apples and oranges and what he is saying makes sense if you are willing to look at what he is saying.

He is not saying that you are getting 20%. He is saying that if you were to throw the money into a cd, the rate of return would have to be much higher than 5% to match the return that you would make by doing this.

That being said, I still think the program is junk. By locking into this program you are guaranteed a 5% return based on the day you buy. The problem is that the stock ALWAYS spikes on those days and usually drops the days following. You could make the arguement that 5% is 5%. The problem is that it takes several days for the stock to be put into your account, and the transaction fees are quite high.

 

[Gr82Aviate]

Money saved by changing the ESSP will be redirected into a reintroduced Profit Sharing program. The Performance Rewards program will remain unchanged. The ROTH 401(k) option sounds nice. The changes may be of benefit to the HCE under the existing 401(k) plan. All things considered, these may be good changes.

NOT "good changes"! We used to get the profit sharing program and the ESPP at the same time, along with a bonus program too...Walter is right the new ESPP blows!!

 

[crj567]

Sky,
Answer one excruciatingly simple question.

What would the APY need to be for a savings account that could deliver the $68.42 in interest from bi-weekly contributions of $100 over a six month period?

I maintain that is in the neighborhood of 21%. Most of you seem to think it is in the neighborhood of 5%. What do you think?

You seem to see compound interest in this transaction somewhere. I don't. The interest is paid once per six months, and it is not compound.....

What your calculation is assuming is a 5% return each time a contribution is made-based on a "dollar-cost-average" balance.

If this were correct, people would have been making at least 63% in the program so far, and they clearly are not.

Don't confuse compound interest with a dollar-cost-average return estimate. You calculation is so far off, I can't understand how you don't see the mistake.

 

[Andy Neill]

You seem to see compound interest in this transaction somewhere. I don't. The interest is paid once per six months, and it is not compound.....

What your calculation is assuming is a 5% return each time a contribution is made-based on a "dollar-cost-average" balance.

If this were correct, people would have been making at least 63% in the program so far, and they clearly are not.

Don't confuse compound interest with a dollar-cost-average return estimate. You calculation is so far off, I can't understand how you don't see the mistake.

Deep breath...clear your mind of all preconceived notions and focus on the question.

Let's pretend someone is going to go to the bank and make a $100 deposit every two weeks in a savings account that pays X% interest. In order to have a total of $68.42 interest paid after 6 months, how much would X have to be?

 

[USCtrojan]

Deep breath...clear your mind of all preconceived notions and focus on the question.

Let's pretend someone is going to go to the bank and make a $100 deposit every two weeks in a savings account that pays X% interest. In order to have a total of $68.42 interest paid after 6 months, how much would X have to be?

Andy, don't bother, it's not worth the frustration at all. You are correct, by the way. And SkyNation will not be able to answer your question, he hasn't been told what to think or what to say. Have a great weekend, looking forward to what shakes out in College FBall!

Trojan

 

[SLOTH]

Deep breath...clear your mind of all preconceived notions and focus on the question.

Let's pretend someone is going to go to the bank and make a $100 deposit every two weeks in a savings account that pays X% interest. In order to have a total of $68.42 interest paid after 6 months, how much would X have to be?

Just shy of 9% compounded monthly?

 

[sweptback]

I don't think the point is how big of a percent it does or does not return.

I think the point is, to put in $1200 in 6 months and get $68.42 back before trading commissions and taxes, it's just not worth the hassle.

 

[Andy Neill]

Just shy of 9% compounded monthly?

You're well short of the mark. Here is the deposit by deposit result if interst were compounded by 1/26th of the annual rate of 18.983% every 2 weeks over the course of 6 months.

Deposit # Amount Cumulative Interest New Tot
1 $100.00 $100.00 $0.73 $100.73
2 $100.00 $200.73 $1.47 $202.20
3 $100.00 $302.20 $2.21 $304.40
4 $100.00 $404.40 $2.95 $407.35
5 $100.00 $507.35 $3.70 $511.06
6 $100.00 $611.06 $4.46 $615.52
7 $100.00 $715.52 $5.22 $720.74
8 $100.00 $820.74 $5.99 $826.74
9 $100.00 $926.74 $6.77 $933.50
10 $100.00 $1,033.50 $7.55 $1,041.05
11 $100.00 $1,141.05 $8.33 $1,149.38
12 $100.00 $1,249.38 $9.12 $1,258.50
13 $100.00 $1,358.50 $9.92 $1,368.42​

 

[Andy Neill]

I don't think the point is how big of a percent it does or does not return.

I think the point is, to put in $1200 in 6 months and get $68.42 back before trading commissions and taxes, it's just not worth the hassle.

Fair enough. What is your plan to do with $100 every two weeks if you don't do this?

 

[sweptback]

Fair enough. What is your plan to do with $100 every two weeks if you don't do this?

Invest it in my total stock market index fund.