Capstone Companies Inc (CAPC)

[Salve Lucrum]

Flp, I believe the PIPE regs have changed

to eliminate much of the "toxic" private placements practices by adapting to the stricter financial disclosures mandated by SOX.

While I posted from memory, I looked it back up and while it is as confusing as any other government balderdash, it does seem to proscribe advanced short selling when using certain types of PIPE's.

In CHDT's case, I would surmise that the private investors feel sufficiently protected by buying discounted shares with a sweetheart conversion rate .... and probably with a nice warrant package thrown in just to keep everybody happy.

Anyway, this was discussed in the NASD Newsletter a few months ago dated Wednesday, December 20,2006 in an article titled FBR to Pay Regulators $7.7 Million to Resolve Charges Related to Improper Short Selling of Compudyne PIPE Shares

Note this paragraph from the article:

"A PIPE (Private Investment in a Public Equity) is a private offering in which accredited investors agree to purchase restricted, unregistered securities of public companies. Only after the PIPE shares registration is approved by the SEC are investors free to sell them on the open market. PIPE shares can only be offered to "accredited" investors - investors with assets of $1 million or more."

I believe the trend is now to hold that an advance short sale conflicts with the restriction because it is difficult to convince anyone that the short sale was not based on those same unregistered, restricted shares.

But anyway, dilution is still dilution, so A-wheeeeeee we go!