What is Watered Stock?
How Does Watered Stock Work?
In technical terms, watered stock exists when the following is true:
For example, if the founders of Company XYZ invested $10 million in the company and then decided to take the company public by selling 50 million shares priced at $3 (a $150 million market capitalization), analysts might say that Company XYZ is issuing watered stock.
Why Does Watered Stock Matter?
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