The Legal Background of Watered Stock Essay

Exclusively available on Available only on IvyPanda® Made by Human No AI

Introduction

Watered stock gets the assumption of stock with completely paid-up status. The stock remains fictitiously remunerated but centrally, the real status indicates per value as unpaid.

Such stock is meant to represent the company’s worth because stating of the company’s shares indicates existence of utmost good faith from the investor as he/she issues resources for investments to the company’s treasury in the intension of achieving dividends, but the fact remains that the money is never paid to treasury.

In a close link to Mitchell (3), watered stock purports to represent the company’s economical worth but fails due to lack of sustentative evidence over existence of the real value.

According to Mitchell (2), the stock market became the core unit of the economy through emergence of the modernized corporations and the security markets. The stock markets now are a strong driving force of the economy. The birth of gigantic modernized firms, decades ago is an indication that the control has a long lifespan.

At present, business transformation studies indicates that new companies are merging at an alarming rate and thus changing the financial, legal, social and economical status of firms. The big companies are thus in a position of controlling shares or stock by engaging huge manufactory and dumping into the markets. The firms are able to make huge profits from the financial and legally acceptable manipulations as opposed to the anticipated technological, managerial, marketing and distribution advancements.

The big manufactures end up as stock speculators as opposed to the economically viable bond or shares buyers/sellers. The situation causes a scenario where instead of the finance dominating the manufactory industries, the wide spread stock ownership dominates finance.

Stock markets began as a tool to assist up-coming businesses, but today the empowered managers utilizes the stock markets as a precise tool for managing tasks within firms (Mitchell, 3). It is the drive behind investments, decision making, planning and operating that causes a great effect to the overall economic development. Watered markets transform manufactory business institutions from the producers and suppliers they ought to be, to profit focused institutions. Today the drive behind creation of business stock markets is no longer the production and real supply, but rather modern stock markets are the key factors most businesses are merging and focusing upon.

According to Mitchell (7), the development of watered stock market came about in various distinct stages for instance; the business mergers in the aim of enhancing direct production caused the watered stock. Business mergers were mainly as an injection of new investors into the market segments.

Effects of the stock markets

The fine understanding of watered stock presented to potential investors today, is the inequitable ownership of an entity such as a company because the worth of a venture at any given time is not equitable to the real investment and for that reason, most investors understand watered stock as security fraud.

The security and exchange commission as an agency often regulates the securities and thus has the responsibility of protecting the investors. With he current trends the insecurity that lead to illegal or manipulative acts and fraudulent dealings world wide, the dealings patterns have widely changed the way investors view the protection and supervision accorded by the commission.

Collapse of prominent companies causes the investors to be holders of the watered stock when the company closes its dealing and forces them to pay up for its value. The investors are keen and the trends seem to indicate the need to stay safe by purchasing only low per stock. The no par or low par stock prevents one from high liability of the stockownership, in cases of a collapse.

Works Cited

Mitchell, Lawrence. The Speculation Economy: How Finance Triumphed Over Industry. San Francisco: Berrett – Koehler, 2007

More related papers Related Essay Examples
Cite This paper
You're welcome to use this sample in your assignment. Be sure to cite it correctly

Reference

IvyPanda. (2018, July 6). The Legal Background of Watered Stock. https://ivypanda.com/essays/the-legal-background-of-watered-stock/

Work Cited

"The Legal Background of Watered Stock." IvyPanda, 6 July 2018, ivypanda.com/essays/the-legal-background-of-watered-stock/.

References

IvyPanda. (2018) 'The Legal Background of Watered Stock'. 6 July.

References

IvyPanda. 2018. "The Legal Background of Watered Stock." July 6, 2018. https://ivypanda.com/essays/the-legal-background-of-watered-stock/.

1. IvyPanda. "The Legal Background of Watered Stock." July 6, 2018. https://ivypanda.com/essays/the-legal-background-of-watered-stock/.


Bibliography


IvyPanda. "The Legal Background of Watered Stock." July 6, 2018. https://ivypanda.com/essays/the-legal-background-of-watered-stock/.

If, for any reason, you believe that this content should not be published on our website, please request its removal.
Updated:
This academic paper example has been carefully picked, checked and refined by our editorial team.
No AI was involved: only quilified experts contributed.
You are free to use it for the following purposes:
  • To find inspiration for your paper and overcome writer’s block
  • As a source of information (ensure proper referencing)
  • As a template for you assignment
Privacy Settings

IvyPanda uses cookies and similar technologies to enhance your experience, enabling functionalities such as:

  • Basic site functions
  • Ensuring secure, safe transactions
  • Secure account login
  • Remembering account, browser, and regional preferences
  • Remembering privacy and security settings
  • Analyzing site traffic and usage
  • Personalized search, content, and recommendations
  • Displaying relevant, targeted ads on and off IvyPanda

Please refer to IvyPanda's Cookies Policy and Privacy Policy for detailed information.

Required Cookies & Technologies
Always active

Certain technologies we use are essential for critical functions such as security and site integrity, account authentication, security and privacy preferences, internal site usage and maintenance data, and ensuring the site operates correctly for browsing and transactions.

Site Customization

Cookies and similar technologies are used to enhance your experience by:

  • Remembering general and regional preferences
  • Personalizing content, search, recommendations, and offers

Some functions, such as personalized recommendations, account preferences, or localization, may not work correctly without these technologies. For more details, please refer to IvyPanda's Cookies Policy.

Personalized Advertising

To enable personalized advertising (such as interest-based ads), we may share your data with our marketing and advertising partners using cookies and other technologies. These partners may have their own information collected about you. Turning off the personalized advertising setting won't stop you from seeing IvyPanda ads, but it may make the ads you see less relevant or more repetitive.

Personalized advertising may be considered a "sale" or "sharing" of the information under California and other state privacy laws, and you may have the right to opt out. Turning off personalized advertising allows you to exercise your right to opt out. Learn more in IvyPanda's Cookies Policy and Privacy Policy.

1 / 1