Stock that is sold with a face value that is much greater then its actual (market) value. While watered stock may appear to be a good value, due to corporation laws, the stock holder may be exposed to liability up to the face value (rather then having their liability limited to the price paid).
Definition from Nolo’s Plain-English Law Dictionary
Shares of stock of a corporation that were issued at a price greater than fair market value. The actual value of watered stock is less than the value carried on the books of the corporation.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:26 pm