What type of stock issuance results in understatement of assets and capital, often hidden for competitive reasons?

The correct answer is related to the concept of secret reserves. Secret reserves refer to assets that a company possesses but does not fully disclose on its financial statements, allowing it to maintain a lower net asset value and capital on paper. This practice can occur for competitive reasons, where a company may want to prevent rivals from gaining insights into its true financial stability or asset strength. By not fully disclosing these assets, the company can also create a buffer against potential losses or downturns without alerting investors or competitors.

In contrast, the other options do not accurately reflect this specific mechanism of financial presentation. Watered stock refers to shares that are issued for more than the actual value of the company's assets, leading to a legal and accounting concern. Par value shares are shares with a nominal face value, which can affect accounting practices but do not inherently lead to a revelation of understated assets for competitive reasons. Over-issued stocks involve the issuance of shares in excess of the authorized amount, which presents a different issue altogether.

Thus, secret reserves prominently embody the idea of understated capital and assets, strategically maintained to protect the company's competitive edge.