2021 Shell PSP Results

Full Transcript

2021 Shell performance shares just vested and arrived at Fidelity. Let’s break down the results.

First, let’s cover the basics of Shell’s performance shares plan. Now, with Shell’s performance shares, or PSP’s, they’re awarded to individuals during their individual performance reviews. The percentage of employees that receive them and the number of shares that each employee gets is dependent on and increases with job grade.

They are a conditional award and have a three-year vesting period. So, 2021 PSP’s are vesting now. Now, let’s break down the 2021 results using John as a hypothetical scenario. John received 800 shares of PSP’s based on his job grade. Now, the Shell performance factor for PSP’s for 2021 was a strong 123%. So, therefore, John’s 800 shares are inflated to 984 shares.

In addition to the performance calculation, Shell also back calcules a notional dividend and adds this to the award. In this case, we’re going to assume that Shell calculated 139 shares. So John ends up with 1,123 shares at vesting. Now we’re going to assume a vesting date of 3/7 at a price of $64.25 per share.

Now, it’s important to note what these shares vested at, because this is your cost basis. The reason why is your cost basis is because the IRS looks at this as a taxable event and considers this income. Therefore, Shell will withhold a portion of your shares to help with your income tax withholding. In this case, we’re going to assume that the IRS withholds 393 shares for tax, and therefore, John is left with 730 shares of Shell stock or about $45,000 worth of Shell stock.

Now, John has to decide what to do with $45,000 worth of Shell stock, as this is now in his Fidelity account. Now, first, you’ll want to check with your job grade and whether or not you’re an insider, because letter categories and insiders do have additional holding restrictions. Assuming you are cleared to sell the stock with Shell you, then you decide do you want to keep it or sell it?

Now, in John’s case, he’ll look at his investment portfolio and say, If I didn’t already own $45,000 worth of Shell stock, would I go out and buy it? I encourage you to check with your financial advisor or reach out to me for a free consultation to help you decide what is best for your individual situation.