Costs from the "flood" of ESOP shares

Appearing increasingly frequently at general meetings, ESOP (Employee Stock Ownership Plan) shares are becoming a popular tool for retaining talent. However, shareholders also have reservations about these plans.

ESOP stock offering

The annual general meeting of shareholders of "shrimp breeding king" Viet Uc Aquaculture concluded at the end of May 2025, with all proposals approved. While the business-related proposals received over 99% approval, the proposals concerning the interests of the company's leadership and employees did not receive such high levels of consensus.

The company approved a bonus for the executive board of 50% of the profit exceeding the consolidated pre-bonus after-tax profit, excluding income from project transfers. Although approved, this proposal received the lowest approval rate, at only 80.3%. In addition, Viet Uc Seafood approved the issuance of ESOP shares at an issue price no lower than par value, with an issuance ratio of 0.5% when the plan is met and 1% when the consolidated pre-bonus after-tax profit is exceeded.

Viet Uc Seafood is not the only organization to propose an ESOP issuance plan. Issuing shares at a price lower than the market price, or even at zero, is still commonly used by some businesses, often accompanied by a one-year or longer (3-5 years) transfer restriction period. However, many more companies are choosing this form of capital raising for the first time, with large issuance volumes. Nam A Bank plans to issue 85 million shares, equivalent to the maximum 5% allowed to be issued based on the number of shares after issuance, from equity capital at a ratio of 100:25.

"The aforementioned capital increase aims to implement Nam A Bank's strategic development direction for 2025, with a vision to 2030, while also enhancing financial capacity to meet business development and risk management requirements, and aligning the interests of employees with the bank's performance," the bank's leadership stated.

Meanwhile, Techcombank is preparing to enter its fifth consecutive year of issuing ESOP shares and will issue 21.4 million shares this year. VIB began issuing ESOP shares in 2022 and has had 7.8 million shares approved for sale this year. Among securities companies, SSI Securities has consistently issued 10 million ESOP shares over the past three years. Vietcap Securities issued 4.5 million ESOP shares at a price of VND 12,000 per share, equivalent to one-third of the market price.

Meanwhile, DNSE Securities is issuing ESOP shares as a bonus, free of charge, but with a transfer restriction period of 12-60 months, releasing 20% ​​annually. The total number of shares issued this year is 12.3 million units, including 9.3 million shares that were planned and approved last year but could not be implemented due to market fluctuations.

Be cautious about ESOP costs.

Explaining the decision to award shares to employees, Ms. Pham Thi Thanh Hoa, General Director of DNSE, said that in addition to fostering a sense of belonging between the company and talented employees, and attracting talent, this incentive policy also creates a positive image, generates humanistic values, and has a positive effect both internally and externally.

The stock bonus plan was approved by DNSE shareholders with a nearly 100% approval rate. However, at some companies, the issue of ESOP issuance has been a topic of direct questioning by many shareholders. Responding to shareholder questions at this year's General Meeting, Mr. To Hai, General Director of Vietcap, stated that the plan was developed based on various data including market capitalization, number of employees, profit margin, and also included a 10-20% discount compared to the average to make it lower than some other companies.

The above questions are reasonable because, in addition to employee benefits, the continuous issuance of ESOPs will affect the rights of existing shareholders by reducing their shareholding percentage and, in the long run, will negatively impact the stock price due to employees selling off their shares to "take profits". For example, in 2023, LDG Investment Joint Stock Company, a company that often "gifts" ESOP shares to employees, had to cancel its ESOP share bonus plan due to low stock prices and other objective factors.

Furthermore, according to Decision 345/QD-BTC of 2020 approving the plan for applying financial reporting standards, the application of International Financial Reporting Standards (IFRS) will enter the next phase after 2025. There are differences in accounting recognition between VAS and IFRS for this transaction. Specifically, IFRS requires the company to recognize an expense arising from the recognition of the fair value of the purchase option at the date of entitlement. Meanwhile, ESOP is a type of expense that reduces the company's profits.

Source: https://baodautu.vn/chi-phi-tu-mua-co-phieu-esop-d295816.html