An issuance ESOP uses financing to acquire newly issued shares from the employer sponsor. The shares are allocated to the participants’ accounts as the loan is repaid. Learn more in our video.
An issuance ESOP is actually a form of ESOP transaction where the corporation issues new shares to the ESOP. It can be leveraged or non-leveraged. A stock bonus plan where new shares are contributed out of treasury stock is essentially an issuance ESOP. Stock is deducted and new equity is created.
On a leveraged basis, the ESOP can borrow money from a bank or simply give a note to the corporation and the corporation can issue a large number of shares to the ESOP. It pays it for overtime as contributions are made to the plan thereby making an advance funding of stock to the plan much more rapidly than making individual contributions annually under a non-leveraged ESOP.