Where do the shares come from? Who buys the shares when an employee leaves? I assume there is a 3rd party bank or something that facilitates. But does the company just have infinite shares to give out?
TIA
In: Economics
As I understand it…
When the ESOP is formed, stocks are held in a trust & not assigned to anyone. Each year some stocks are assigned to your account. Whether they’re moved from one trust to another, or just are assigned to you within the same trust I don’t know.
Also, as people retire, quit, or get fired, they get their payout and their old shares get redistributed to the remaining employees.
That’s as I understand it, I’m certainly not an expert.
Companies have a certain number of shares they are authorized to issue. The number they’ve actually issued is less than that. When they grant shares to employees, they’re just coming from that pool of authorized but unissued shares at their discretion.
Awards to employees/other issuances effectively dilute existing SHs. This is one reason why companies conduct share repurchases, to manage that dilution.
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