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When a company gives its employees an ESPP plan, where do they get the stocks to sell to them? are they being bought in the free market? but then, where does the discount come from? is it stocks that currently belong to the company and this is its way of making them publicly tradable? or is it creating stocks out of thin air, like printing money?

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These are treasury stocks allocated to the plan. If necessary, a company issues new shares (depending on a company it may require shareholders or only board approval).

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    In other words, ultimately, the same place other shares sold by the company itself come from: shares owned by the company itself, either never previously sold or repurchased. The discount comes from the same place other employee benefits come from; it's part of what they spend along with salary to help attract and retain good staff.
    – keshlam
    Commented Aug 5, 2015 at 20:12

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