Selling Restricted Stock

[Tortoise]

I have some restricted stock units (RSUs) from my company that will be vesting in a few weeks, and I'm planning on cashing them out the moment they vest. There are a few reasons for that:

• I've read that RSUs are taxable as soon as they vest, not when you sell them, so there is no tax benefit to deferring their sale
• I could really use the money toward a down payment on a home
• Holding onto the RSUs would be equivalent to making a leveraged bet on the security and prosperity of my current job (i.e., not a well diversified investment)

Have any of you received RSUs from your employer, and if so, what was your thought process regarding holding vs. selling them? Similar to mine?

[clacy]

Based on what you've said, my thought process would be the same, unless there was still significant upside in your company's valuation.

[eufo]

Your 3rd reason (leveraging your employment) is the main reason I would be looking to sell. Even if you didn't have a downpayment needed for a home, it would still be wise to diversify those holdings. If the tax was deferred until the sale of the stock, I might hesitate a bit and calculate the true cost.

In short, I think you're wise to sell as soon as you are able.

There is a case for owning stock in one's employer, as it will likely increase your desire to do better work, but there are just so many variables you cannot control with a company's value that it's a risk you need to be cautious about.... think Enron.

[drumminj]

I've dealt with a lot of ISOs and RSUs over the past few years. Yes, they are taxable when they vest. Agree with selling the day they vest -- that's what I did.

Think of it this way -- if you had cash in hand now, would you buy your employer's stock? If not, it doesn't make sense to hold on to the RSUs. Yes, you could hold for a period to pay long-term capital gains, but (to my understanding) that would only be on any increase in value from the vest date, not the value at vest -- no different than if you just bought them on the open market.

I had a really good outcome with company stock (got in early before company went public), but in general having your financial health dependent on a single company is a risky endeavor -- you could lose your job/salary, insurance, and savings in one fell swoop. Diversification is where it's at.

[ngcpa]

I had some restricted stock many years ago. I don't know if things have changed since then (this was about 20 years ago), but you couldn' just sign
them over to a broker and have him sell them. I found I would have to go to a lawyer and have him do some magic before they could be sold.
Unfortunately it would have cost a very significant part of what they were worth. Some of the employees, who also received shares talked about all getting a lawyer together and doing it all at once. Shortly after that the company worked some magic and we were able to sell them without any hassle or
wxpense. They are called restricted stock for a reason.
Norm

[Pointedstick]

I've found myself in the same situation and did exactly what you're planning. Good source of house down payment funding. I wouldn't hold onto it unless your company's stock is really special (AMZN, GOOG, AAPL, etc), and even then, maybe not.

[whatchamacallit]

I have never had the pleasure of receiving RSUs so I can't speak personally but it sounds like an immediate sell as soon as it is an option.

Here is an article talking about the psychology of what stops people from selling them when they really should.

https://blog.wealthfront.com/manage-vested-rsus/

[Tortoise]

Thanks for the great input, everyone!

[ochotona]

I sold my RSU shares about 630 trading days ago. Company stock down -12% since then, S&P500 up +24%. None of us have anything to prove by being loyal. It won't be reciprocated most of the time.