Watered stocks are basically stocks that offered to the public far greater than their true value. The term ‘watering down stocks in the stock market’ means to offer the public with such kind of stocks that are artificially inflated (Investopedia).
What does it mean when stock is watered down?
Aug 25, 2021 · Watered stock referred to shares of a company that were issued at a much greater value than the value implied by a company's underlying assets, usually as part of a scheme to defraud investors. The...
What is an example of watered stock?
Sep 29, 2020 · Essentially, watered stock is another way to say ' overvalued stock .' Some sources claim that the term originated in the livestock trade, where ranchers would force cattle to drink lots of water the day before auction so that they weighed more. Ask …
What is the origin of the term'stock watering'?
watered stock n. shares of stock of a corporation which have been issued at a price far greater than true value. In this case, the actual value of all shares is less than the value carried on the books of the corporation.
How do you use watered down in a sentence?
Apr 22, 2022 · The Dow Jones Industrial Average DJIA was down 483 points, or 1.4%, at 34,309, after falling more than 500 points at its low. The S&P 500 SPX lost 51 points, or 1.2%, to 4,342, and was on track ...
What is the meaning of watered share?
What are the causes of watered stock?
Who is liable for issuance of watered stock?
What par value means?
What is stock watering?
"Stock watering" was originally a method used to increase the weight of livestock before sale. The cattle were first given salt to make them thirsty, then allowed to drink their fill of water. The term's introduction to the New York financial district is popularly credited to Daniel Drew, a cattle driver turned financier.
When was the last time a watered stock was claimed?
The last significant watered stock claim in American law occurred in 1956. In that case, the Minute Maid company (then part-owned by its pitchman, Bing Crosby) attempted to recover debts directly from the owner of a distribution business on the basis that he had never fully paid the $45,000 par value of his stock.
Why did Jay Gould issue watered stock?
Jay Gould, as president of the Erie Railroad, notoriously issued watered stock to defeat a takeover attempt. Watered stock is an asset with an artificially- inflated value. The term most commonly refers to a form of securities fraud in which a company issues stock to someone before receiving at least the par value in payment.
Who criticized the practice of watered stock?
The practice of watered stock was sharply criticized by members of the Social Gospel movement such as George D. Herron and Walter Rauschenbusch. For example, in 1898, Herron said "watered stock is a method of high treason by which corporations forcibly tax the nation for private profit, and by which they annually extort millions from American toilers and producers. It is... essentially a system of violence, spoil, and robbery."
Who sold watered stock to Cornelius Vanderbilt?
Examples. In 1866–1868, during the so-called Erie War, Cornelius Vanderbilt was defrauded by James Fisk, Daniel Drew and Jay Gould, who sold $7,000,000 worth of watered stock to him in his attempt to acquire the Erie Railroad. In 1873, the Railway Commissioners of Illinois reported that the stock of the railway companies in ...
What did American stock promoters do in the late 1800s?
American stock promoters in the late 1800s could inflate their claims about a company's assets and profitability, and sell stocks and bonds in excess of the company's actual value. To do so, they would contribute property to a new corporation in return for stock at an inflated par value.
Overview
Origin of term
"Stock watering" was originally a method used to increase the weight of livestock before sale. The cattle were first given salt to make them thirsty, then allowed to drink their fill of water. The term's introduction to the New York financial district is popularly credited to Daniel Drew, a cattle driver turned financier.
Explanation
American stock promoters in the late 1800s could inflate their claims about a company's assets and profitability, and sell stocks and bonds in excess of the company's actual value. To do so, they would contribute property to a new corporation in return for stock at an inflated par value. On the balance sheet, the property would be the corporation's only capital, and because legal capital wa…
Examples
• In 1866–1868, during the so-called Erie War, Cornelius Vanderbilt was defrauded by James Fisk, Daniel Drew and Jay Gould, who sold $7,000,000 worth of watered stock to him in his attempt to acquire the Erie Railroad.
• In 1873, the Railway Commissioners of Illinois reported that the stock of the railway companies in the state was inflated to $75,000,000, bringing $6,000,000 in yearly profits. In particular, the investigation uncovered that 75% of the Central Pacific Company's assu…
Criticism
The practice of watered stock was sharply criticized by members of the Social Gospel movement such as George D. Herron and Walter Rauschenbusch. For example, in 1898, Herron said "watered stock is a method of high treason by which corporations forcibly tax the nation for private profit, and by which they annually extort millions from American toilers and producers. It is... essentially a system of violence, spoil, and robbery."
See also
• David Dodd
• Daniel Drew
• Counterfeiting