watered stock

Watered Stock

Stock that is issued with a value much greater than the value of the issuing company's assets. Watered stock can be caused by excessive stock dividends, overvalued assets and/or large operating losses.

Notes:

Assets can be overvalued for several reasons, including inflated accounting values or excessive issue of stock (through a dividend or employee stock-option program). This term is thought to originate from ranchers who would feed their cattle large amounts of water before market day to make them heavier, fetching a price higher than their worth.

See also: Diluted EPS, Earnings Per Share - EPS, Overbought, Overvalued, Stock Dividend, Value Investing, Value Stock, Value Trap

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Watered stock

A stock representing ownership in a corporation that is worth less than the actual invested capital, resulting in problems of low liquidity, inadequate return on investment, and low market value.

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watered stock

Stock that is issued with a value considerably in excess of the value of the assets that support it. The term may be derived from the practice of feeding cattle salt to induce them to drink large amounts of water just before they are sold, thereby increasing their weight. Thus, the buyerwhether of stock or of livestockpays for more than is actually received.