Watered Stock

Watered Stock - A watered stock is a stock that represents (partial) ownership of a company, but the worth of that moment is less than the capital that was invested in the first place. The term watered stock is often used to refer to a form of securities fraud. Holders of a watered stock are, when the company is closed by the creditors of the company, personally liable for the value that has ?disappeared?. To prevent such a liability corporate lawyers advise their clients to purchase low par sock. Since 1912 New York autorized the use of no par stock, and often no par and low par stock are advised to prevent such a liability to the stock owners. Since 1956 there are hardly any cases noted about watered stocks.