Watered stock

Watered stock is shares in a corporation that are sold at a price higher than the value of the underlying assets. This situation can arise when the assets are grossly overvalued, usually through a manipulative scheme. The seller of the shares then pockets the proceeds and leaves investors with valueless stock.

The term comes from cattle ranching, where ranchers forced cattle to drink an excessive amount of water in order to sell them immediately thereafter at a weight-based price.

Related Courses

Fraud Examination 
Fraud Schemes 
How to Audit for Fraud