Watered stock

[1] 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.

[2] Historically, stock watering was prevalent in the 19th century rail industry in the United States.

Holders of watered stock could be personally liable if creditors foreclosed on the corporation's assets.

[11] The practice of watered stock was sharply criticized by members of the Social Gospel movement such as George D. Herron[12] and Walter Rauschenbusch.

[13] 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.

1869 stock certificate of the Erie Railroad, signed by Jay Gould
Jay Gould, as president of the Erie Railroad, notoriously issued watered stock to defeat a takeover attempt.
Stock certificate of Harroun Motors
To indicate that the stock is not watered, this stock certificate declares the par value of $10 per share "full paid and non-assessable."