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.