As part of an employee share ownership plan (ESOP), the employee(s) get a certain # of shares held in their name. Every month, the employer also matches the contribution and let us assume the employee stays with the same employer for 30 yrs and never sells his or her shares.
My question is:
How can the employer find so many 'shares' to give away to so many employees every paycheck? If none of the employees sell their shares, it seems the only option that the employer has is to keep dividing the company into more number of shares, which cannot go on forever. I am assuming that these shares are common shares, but am not sure if that assumption is true?
If the employer cannot just keep 'creating' more shares, the only option is to buy shares back in the secondary market (assuming a public company). But even that is not possible because after a certain point, people in open market may not wish to sell their shares back to the company.
So where do shares issued to employees come from?