An Employee Stock Purchase Plan (ESPP) is a company-administered program that allows eligible employees to buy company stock at a reduced price. Employees typically contribute to the plan by having a portion of their salaries deducted, and these contributions accumulate from the offering date to the purchase date. On the purchase date, the company uses the accumulated funds to acquire company stock on behalf of participating employees at the discounted price. ESPPs are designed to encourage employee ownership, align employee interests with those of the company, and provide a convenient way for employees to invest in their employer’s stock.
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