What refers to stock issued not in exchange for equivalent value, leading to asset overstatements?

The term that refers to stock issued not in exchange for equivalent value, leading to overstatements of assets, is "watered stock." This concept arises when a corporation issues shares of its stock in exchange for assets that are overvalued or perhaps even for assets that do not hold any real value. As a result, the company's recorded assets become inflated beyond their actual worth, creating a misleading financial position.

When a corporation issues watered stock, it effectively dilutes the value of existing shares and misrepresents its financial health to investors and the market. This practice is illegal in many jurisdictions because it can lead to deception of shareholders and the broader investing public, ultimately harming trust in the financial markets.

Other options, while relevant in the context of stock and financial reporting, do not correctly define the scenario of issuing stock for inadequate consideration.