WATERED STOCK

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A watered stock is a stock offered to public investors by founders and promoters of a company at a greatly inflated price compared to its book value or cost; or stocks of a company issued for property that is worth less than the stock.

This term was derived from the practice in the cattle industry, the habit of encouraging animals to drink a lot of water before being weighed for sale. The weight of the consumed water would make the cattle deceptively heavier, enabling the ranchers to fetch higher prices for their cattle. This term again was introduced by Daniel Drew, a cattle driver turned financier.

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