watered stock
Noun: - Stock representing ownership of overvalued assets; stock of a corporation whose total worth is less than its invested capital: This term refers to shares of a company that have been issued at a price significantly higher than the actual value of the company's underlying assets. The company's total market value or asset value is less than the capital that has been invested in it, making the stock "watered down" or diluted in value.
This is a specific financial and investment term. It is used to describe a situation of corporate overvaluation or misrepresentation, often with negative connotations of deception or poor financial health. - It is typically used in formal contexts like financial analysis, investment reports, or economic discussions. - It often appears in historical contexts, as modern securities regulations have made this practice less common.
- The investors discovered they had purchased watered stock after the company's true financial liabilities were revealed.
- During the 19th century, watered stock was a common scheme used by unscrupulous railroad promoters.
- Analysts warned that the company's aggressive issuance of new shares without increasing assets could lead to watered stock.
- The concept originates from the practice of feeding cattle salt to make them drink water before being sold by weight, thus "watering down" their true value. Similarly, "watered stock" inflates the apparent capital of a company without a corresponding increase in real asset value.
- The term is often associated with corporate fraud or periods of weak financial regulation.
- Watering (n): The act of inflating the value of a company's stock or assets artificially.
- The watering of the company's capital led to its eventual collapse.
- Overvalued Stock (n): A more general term for stock trading above its intrinsic value, which may or may not involve the fraudulent connotations of "watered stock."
- Inflated stock
- Overcapitalized stock
- Fully-paid stock: Stock issued for which the full par value has been paid.
- Undervalued stock: Stock trading below its estimated intrinsic value.
- To water the stock: The act of issuing watered stock.
- The founders were accused of trying to water the stock before the public offering.
- stock representing ownership of overvalued assets; stock of a corporation whose total worth is less than its invested capital