Should you buy shares in your company?

If you work for a listed company, you might be presented with a unique opportunity to buy shares at a discount as an employee. Let’s talk about how you might think through if this is worth it for you

I know that this issue is probably a bit niche, but I hope you still find it interesting or valuable even if you aren’t facing this situation!

When I got my first job at a listed company, they had an offer that you could buy shares in them at a significant discount. The catch? You had to hold for at least 5 years, or you there was a financial penalty. (I don’t remember what it was, I was 19!)

I had no idea what to do, so I asked the only person in my life who knew anything about investing: my dad. I was expecting financial advice, but he gave me a different structure for thinking about it that I think you can use even if you aren’t thinking about investing literally.

🚀 Is the company going to get better or worse in the future?

First off, the trajectory. How do you think the company is performing, and do you think they’re going to improve in the future? You might want to consider things like:

• Leadership – do you think the key leaders in the company are going to make the right decisions to weather storms or capitalise on opportunities? (Do you trust them to run the business?)

• Market – do you think the space the company operates in is in trouble or going to thrive?

• Adaptability – do you think the company is capable of adjusting to changes in the market, advancements in technology, or evolution in consumer preferences?

In my instance, I didn’t have a lot of confidence in the leadership team or their ability to adapt to changes in the market. I did think the market would continue to exist, but (potentially pessimistically) I was not confident that the business would continue to be a big player.

💡 Can I influence the outcomes of the company at all?

Secondly, consider your role in this company. Does your job – or what you’re able to influence – directly have an impact on outcomes? (And are you planning to be there long enough to have an impact?)

This one has less of a framework, but consider what you work on and how it actually impacts customers. Maybe you’re designing on the main product that this company sells in their primary market – and so actually have a lot influence! Or you have a lot of pull with some key decision makers.

In my case, I was working on a lot of really important products… but in a really tiny market for this global business. While I might have had impact in Australia, we weren’t listed here and I had no visibility or influence on the primary markets. I also wasn’t particularly happy, and didn’t like the idea of committing to five more years working there.

If you couldn’t tell, I decided not to invest in this company. I was very comfortable with this decision, and ended up leaving within a year after this, so I wouldn’t have made any money anyway.

I haven’t had this exact situation happen to me again, especially since I’ve been choosing roles at smaller, private companies, but I do still think of this often when I’m evaluating if I’m happy with my current job. If you could invest in your company – but wouldn’t – then you might want to consider if it’s the right place for you to grow.

(If you were interested in some actual financial advice, I don’t have much for you! But if you feel confident in the direction of the company, then you can look through their public investor and read their latest annual report or announcements to see if you learn anything new.)

That’s it for this week! I tossed up whether or not I wanted to write about this for a while because it is so specific, but I hope it does help one of you out there.