SaaS Sharesave stick or bail
Discussion
For those not familiar, a Sharesave scheme (also known as a Save As You Earn) is an employee benefit that lets you save a fixed amount each month for a set period while giving you the option to buy company shares at a discounted price that is fixed at the start of the scheme.
If the share price rises above the option price, you can buy the shares and potentially make a profit; if it falls, you can simply take back your savings instead of buying the shares.
I am 1 year into a 3 year sharesave scheme and unfortunately almost as soon as the scheme began the share price took a hammering as part of the "saaspocalpyse" and it's currently trading at around 50% of the option price.
I was fairly bullish and so the monthly amount is not insignificant, it's not a problem to meet the payments, but I am concerned about the opportunity cost vs pension/S&S ISA.
As far as I can tell, the company finances are healthy and expected to continue improving over the next 2 years. Up until last year the share price had been rising steadily. It is fear around AI which has caused the price drop, and I can't see that changing much over the next 2 years? I would not be surprised if there is a stock market correction within the next 2 years due to the AI bubble, but I have a feeling SaaS companies may also be hit by that, which doesn't make sense to me, but who said markets are rational?
I can pull all my money out now, but i'd have to leave the scheme. If I did leave the scheme i'd split that money between pension and S&S ISA (Lifestrategy 80).
What would you do?
If the share price rises above the option price, you can buy the shares and potentially make a profit; if it falls, you can simply take back your savings instead of buying the shares.
I am 1 year into a 3 year sharesave scheme and unfortunately almost as soon as the scheme began the share price took a hammering as part of the "saaspocalpyse" and it's currently trading at around 50% of the option price.
I was fairly bullish and so the monthly amount is not insignificant, it's not a problem to meet the payments, but I am concerned about the opportunity cost vs pension/S&S ISA.
As far as I can tell, the company finances are healthy and expected to continue improving over the next 2 years. Up until last year the share price had been rising steadily. It is fear around AI which has caused the price drop, and I can't see that changing much over the next 2 years? I would not be surprised if there is a stock market correction within the next 2 years due to the AI bubble, but I have a feeling SaaS companies may also be hit by that, which doesn't make sense to me, but who said markets are rational?
I can pull all my money out now, but i'd have to leave the scheme. If I did leave the scheme i'd split that money between pension and S&S ISA (Lifestrategy 80).
What would you do?
I started buying into my company share scheme around 15 years ago. I starting buying at £12 a share, fairly soon after the share price fell and fell and fell. I continued to buy (I did question myself). Over the following ten years the share price fell to around £2.50 during COVID. The Share price has now hit £14 (although currently around £11.50). I am have done okay and probably 5 figures up.
Only you know the health of your firm, a falling share price whilst you're buying isn't necessarily a bad thing.
Only you know the health of your firm, a falling share price whilst you're buying isn't necessarily a bad thing.
Does your company launch new 3 and/or 5 year schemes every year, or do the schemes run to completion before new ones are launched?
Where I work they launch annually, so if the option price is underwater after, say, 10 months then you can exit, withdraw your savings, and join the new scheme in 2 months time at the new lower option price. I’ve done that on a couple of occasions.
If you only have the ability to join once every 3/5 years then I’d be tempted to stick it out for a while longer to see if the share price improves.
Where I work they launch annually, so if the option price is underwater after, say, 10 months then you can exit, withdraw your savings, and join the new scheme in 2 months time at the new lower option price. I’ve done that on a couple of occasions.
If you only have the ability to join once every 3/5 years then I’d be tempted to stick it out for a while longer to see if the share price improves.
Jamessd said:
Does your company launch new 3 and/or 5 year schemes every year, or do the schemes run to completion before new ones are launched?
Where I work they launch annually, so if the option price is underwater after, say, 10 months then you can exit, withdraw your savings, and join the new scheme in 2 months time at the new lower option price. I ve done that on a couple of occasions.
If you only have the ability to join once every 3/5 years then I d be tempted to stick it out for a while longer to see if the share price improves.
No mention of another scheme launching unfortunately. Everyone in the same boat so the incentive aspect of it is pretty dead at the moment.Where I work they launch annually, so if the option price is underwater after, say, 10 months then you can exit, withdraw your savings, and join the new scheme in 2 months time at the new lower option price. I ve done that on a couple of occasions.
If you only have the ability to join once every 3/5 years then I d be tempted to stick it out for a while longer to see if the share price improves.
My wife and I haven’t stuck a penny in ESPP for over two years, we work for SP500 tech companies.
I’d far rather put it elsewhere than into SaaS stock right now. That said, in our scheme there is a rollover of the paltry limit ($25k a year I think) so can pump it if it looks worth doing but the 6 month holding periods make it a tough ask these days.
I’ve done far better from index investing vs the above.
I’d far rather put it elsewhere than into SaaS stock right now. That said, in our scheme there is a rollover of the paltry limit ($25k a year I think) so can pump it if it looks worth doing but the 6 month holding periods make it a tough ask these days.
I’ve done far better from index investing vs the above.
Tim Cognito said:
For those not familiar, a Sharesave scheme (also known as a Save As You Earn) is an employee benefit that lets you save a fixed amount each month for a set period while giving you the option to buy company shares at a discounted price that is fixed at the start of the scheme.
If the share price rises above the option price, you can buy the shares and potentially make a profit; if it falls, you can simply take back your savings instead of buying the shares.
I am 1 year into a 3 year sharesave scheme and unfortunately almost as soon as the scheme began the share price took a hammering as part of the "saaspocalpyse" and it's currently trading at around 50% of the option price.
I was fairly bullish and so the monthly amount is not insignificant, it's not a problem to meet the payments, but I am concerned about the opportunity cost vs pension/S&S ISA.
As far as I can tell, the company finances are healthy and expected to continue improving over the next 2 years. Up until last year the share price had been rising steadily. It is fear around AI which has caused the price drop, and I can't see that changing much over the next 2 years? I would not be surprised if there is a stock market correction within the next 2 years due to the AI bubble, but I have a feeling SaaS companies may also be hit by that, which doesn't make sense to me, but who said markets are rational? ...
If the share price rises above the option price, you can buy the shares and potentially make a profit; if it falls, you can simply take back your savings instead of buying the shares.
I am 1 year into a 3 year sharesave scheme and unfortunately almost as soon as the scheme began the share price took a hammering as part of the "saaspocalpyse" and it's currently trading at around 50% of the option price.
I was fairly bullish and so the monthly amount is not insignificant, it's not a problem to meet the payments, but I am concerned about the opportunity cost vs pension/S&S ISA.
As far as I can tell, the company finances are healthy and expected to continue improving over the next 2 years. Up until last year the share price had been rising steadily. It is fear around AI which has caused the price drop, and I can't see that changing much over the next 2 years? I would not be surprised if there is a stock market correction within the next 2 years due to the AI bubble, but I have a feeling SaaS companies may also be hit by that, which doesn't make sense to me, but who said markets are rational? ...
A quick reply without doing much reading, so sorry if a duplication.
If you are up to the maximum monthly contribution (although that does not really matter), you should be able to cancel your latest plan and then begin again when the next option scheme is offered (presumably annually) at the lower share price.
As you say, you are not taking any share price risk, until you become owner of the shares, so nothing to lose.
Hopefully your employers share price does increase, otherwise you can just get your savings back.
I was very fortunate with these schemes, but it varies so much. We do need luck. Picture the huge option scheme results difference, of being an employee of Aston Martin Lagonda, or Apple Inc.
Edited by Jon39 on Tuesday 28th July 08:15
okgo said:
My wife and I haven t stuck a penny in ESPP for over two years, we work for SP500 tech companies.
I d far rather put it elsewhere than into SaaS stock right now. That said, in our scheme there is a rollover of the paltry limit ($25k a year I think) so can pump it if it looks worth doing but the 6 month holding periods make it a tough ask these days.
I ve done far better from index investing vs the above.
I'd never invest in individual stocks otherwise, but the guaranteed no loss element made it worth the gamble.I d far rather put it elsewhere than into SaaS stock right now. That said, in our scheme there is a rollover of the paltry limit ($25k a year I think) so can pump it if it looks worth doing but the 6 month holding periods make it a tough ask these days.
I ve done far better from index investing vs the above.
Hell, it still might pay off if I keep my money in and the S&P500 crashes.
Gary C said:
Think yourself lucky
I put £15K into our companies sharesave scheme and was looking at a £100K return when some planes few into a building in the US then the company went bankrupt !
Wow, 100k in 2001 was quite substantial. Spare a thought for all those who perished though ay...I put £15K into our companies sharesave scheme and was looking at a £100K return when some planes few into a building in the US then the company went bankrupt !
Jon39 said:
A quick reply with doing much reading, so sorry if a duplication.
If you are up to the maximum monthly contribution (although that does not really matter), you should be able to cancel your latest plan and then begin again when the next option scheme is offered (presumably annually) at the lower share price.
As you say, you are not taking any share price risk, until you become owner of the shares, so nothing to lose.
Hopefully your employers share price does increase, otherwise you can just get your savings back.
I was very fortunate with these schemes, but it varies so much. We do need luck. Picture the huge option scheme results difference, of being an employee of Aston Martin Lagonda, or Apple Inc.
So it's either keep plugging away for 2 more years and hope the share price more than doubles (I would say unlikely because AI is going to continue hammering saas share prices, and I think there's the possibility of a double whammy when the ai bubble pops) or bail out now and invest the money in an index tracker/pension.
Tim Cognito said:
I'd never invest in individual stocks otherwise, but the guaranteed no loss element made it worth the gamble.
Hell, it still might pay off if I keep my money in and the S&P500 crashes.
I’ve never had sharesave - only ever ESPP, they all differ but any holding the bag period makes it a no go for me. My wife’s actually allow sale on vest so you can’t lose. Hell, it still might pay off if I keep my money in and the S&P500 crashes.
Tim Cognito said:
...
What would you do?
So you have something similar to a two-year duration call option on a company with a strike price around twice the current trading price of the shares. It isn't quite like a call option, as you can't exit early (to take a profit), and you presumably only make a profit when the price rises above the strike, but you also aren't paying directly for the option (other than the opportunity cost of what else you might do with the money).What would you do?
My starting point would be to estimate the current value of the option by looking at the cost to buy a call option on that company with a similar duration. It isn't exactly 'like-for-like', but it is a reasonable starting point.
I have no idea the name of the actual company, but let's say it is a saas company like Atlassian, which I think is plausible. Using them as an example, you can buy a 542-day call option (not quite 2 years) for around $14. That means to get the right to buy 100 shares in that company would cost circa $1,400.
Using that example, unless you are getting some other discount, or some other tax advantage, or the money being invested isn't a large portion of your income, or you aren't already maxing out your pension contribution, I would exit the scheme now and increase my pension contribution by the same amount. The tax relief is likely worth more than the potential call option (in my simple example).
Gary C said:
Think yourself lucky
I put £15K into our companies sharesave scheme and was looking at a £100K return when some planes few into a building in the US then the company went bankrupt !
Was that Cantour Fitzgerald? I was working in the UK for a global division of MMC at the time, we lost 260 employees at 9/11. Very sad times.I put £15K into our companies sharesave scheme and was looking at a £100K return when some planes few into a building in the US then the company went bankrupt !
I also contributed for several years to MMC's ESPP. Never sold the shares, still have them. Retired from there in 2004. Share price is now 6.5 X more than I paid for them!
R.
Being unfamiliar with saas, I did a search and found (probably amongst other meanings) that it is the London market 'ticker' for Microlise Group plc.
I don't think that business can be the one that you are referring to, because it was listed in 2021 at a valuation of £156 milion, but is currently valued at £46 million. A share price fall of 72%.
Oh dear, share save schemes have been of no help for that firm's employees, so far.
Serious investors look for a steady growth record, increasing profitability and solid dividends.
Jon39 said:
...
Being unfamiliar with saas, I did a search and found (probably amongst other meanings) that it is the London market 'ticker' for Microlise Group plc.
....
I wouldn't be quite so complacent. Of course, big companies often have complex, integrated processes, so removing existing, core software components, even if they can be replaced with alternatives with a very low marginal cost, is much easier said than done. For that reason, many companies will just keep using the same tools, like Salesforce etc etc.
However, when you look at the underlying valuation models used to calculate the current fair value of some of these SaaS companies, they often have some fairly aggressive growth/market-share assumptions. If you adjust some of those assumptions downwards, even by a small amount, it has a much larger effect on the current share price, due to the compounding effect. And I think it is reasonable that the growth assumptions many SaaS companies were hoping for, say 18 months ago, are no longer realistic, due to the new alternatives AI will be able to create.
However, when you look at the underlying valuation models used to calculate the current fair value of some of these SaaS companies, they often have some fairly aggressive growth/market-share assumptions. If you adjust some of those assumptions downwards, even by a small amount, it has a much larger effect on the current share price, due to the compounding effect. And I think it is reasonable that the growth assumptions many SaaS companies were hoping for, say 18 months ago, are no longer realistic, due to the new alternatives AI will be able to create.
okgo said:
Obviously none of that has actually happened. Even Anthropic have salesforce in their business as a CRM. It s all very silly.
What will happen is a move to token usage for AI based products though, many are there already.
Who would have thought business would rather pay someone else to solve their software requirements so they can keep focused on their core mission rather than farting around trying to vibe code shoddy replacements...What will happen is a move to token usage for AI based products though, many are there already.
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