What is "watered stock"

n. (context legal English): Shares of stock in a business that are inflated by parties colluding with the seller making inflated offers for the property that the stock represents, which are reported to potential sellers as indicative of the value of the stock.

n. stock representing ownership of overvalued assets; stock of a corporation whose total worth is less than its invested capital

Watered stock is an asset with an artificially- inflated value. The term is most commonly used to refer to a form of securities fraud common under older corporate laws that placed a heavy emphasis upon the par value of stock.