What is the term for stocks that have been issued and are classified as undercapitalized?

The term for stocks that have been issued and are classified as undercapitalized is known as "watered stock." This refers to shares that have a stated capital value that is not accurately reflected in the actual value contributed by the shareholders. In essence, "watered stock" occurs when a company inflates the value of its shares, often through over-valuation of assets or raising capital that does not equate to the true worth of the investment, leading to a situation where the stock is deemed undercapitalized.

Watered stock poses risks to both the company and its investors, as it can lead to misleading financial statements and a false picture of a company's health. The term draws from the practice of "watering" down the value of stock at issuance, resulting in shares that are not genuinely backed by the true capital of the business.

In contrast, secret reserves refer to assets that are not disclosed on the balance sheet but would impact the company's valuations. Par value shares relate to the minimum price at which shares can be issued, not necessarily reflecting undercapitalization. Common shares denote a type of stock that represents ownership in a corporation, without directly addressing the issue of undercapitalization.