Basically, a company resorting to PIPE financing is like a couple going to a loan shark to finance their mortgage payments.
PIPE financing is the number one reason why most pink sheet companies implode, imho.
There are several reasons for this. Partly it's the "death spiral convertibles", partly, the fact that the very companies financing the Pinksheets are also shorting the stock (and covering cheap with the shares they're getting as a result of the PIPE deal) and lastly, the terms of the financing are enough to doom the company to an impossible-to-meet payment plan.
Just think of a $50K a year couple, already saddled by debt, buying a $500K house with an adjustable rate mortgage, interest only, no money down!
No matter how impressive their credentials, or income potential, the debt burden would be enough to bury them. Imagine then that the very bank that lent them the money were then in a position to add an additional $5K a month in debt to their monthly burden...
However, worse still, is the fact that some cynical CEOs enter into an agreement with a PIPE financer, knowing full well that the company will never survive. The company is a sham, never designed to survive, but merely an excuse for the CEO to collect a nice bonus check, in full cooperation with the PIPE financiers.
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If you take anything I say as advice, you're crazier than I am.
