Watered Stock Law and Legal Definition
Watered stock is shares of stock of a corporation which have been issued at a price that greatly exceeds its true value. It is stock of a corporation whose total worth is less than its invested capital. In this case, the actual value of all shares is less than the value carried on the books of the corporation.
Watered stock can result in problems of low liquidity, inadequate return on investment, and low market value for investors. Watered stock also describes stock that is issued in exchange for labor, services or property that has a fair valuation that is less than the par value.