Capstone's $32.01 million units offering causes shares to sink; Lingo raises C$5 million from PIPE

By Devika Patel

Knoxville, Tenn., Sept. 18 - Capstone Turbine Corp. shares (Nasdaq: CPST) plummeted 23.43%, or 41 cents, to close at $1.34 Thursday after the company announced plans to raise $32.01 million in a direct offering of units.

Capstone's management has been particularly vocal about its opposition to share dilution, so the offering naturally shook investor confidence in an already unstable market environment.

Separately, Lingo Media Inc. announced after the close Wednesday that it had completed a C$5 million private placement of special warrants, heralding a financial partnership with investor Orascom Telecom Holding SAE.

Capstone plans $32.01 million

Capstone Turbine, a Chatsworth, Calif.-based maker of microturbine systems, announced a $32.01 million registered direct offering of units Thursday, which will be conducted via agent Wachovia Capital Markets, LLC.

"This offering is an opportunity for the company to fund corporate growth and meet the demand for our products," Capstone's director of investor and public relations, Alice Barsoomian, told the Prospect News. "Our shares may have fallen slightly, but we believe that the quality of our products and technology, along with our high standards of conducting business, will resonate with investors. Our stock price has increased steadily recently and the company is not anxious over the recent turn."

The company will sell 2,148,566 units at $14.90 per unit. Each unit consists of 10 common shares and a warrant for three shares. The warrant is exercisable at $1.92 per share for five years.

Investors will be required to purchase 10 shares and a warrant to purchase three shares as a unit, but no actual units will be issued.

Instead, the shares and the warrants are immediately separable and will be issued separately.

The company will issue a total of 21,485,660 shares and warrants for 6,445,698 shares.

Settlement is expected on Tuesday.

Proceeds will be used to fund product development, to fund corporate growth and for other general corporate purposes.

Lingo gets C$5 million

Toronto's Lingo Media announced the completion of a C$5 million private placement of special warrants.

The publishing company sold 2,857,143 special warrants at C$1.75 each to Orascom Telecom.

"This financing and strategic partnership with Orascom Telecom positions Lingo Media very well to capitalize on the company's growth opportunities," Lingo Media director Anthony Lacavera said in a press release. "English language learning is increasingly moving to internet-based applications, and Lingo Media's Speak2Me product puts the company in a market leadership position."

"We are looking forward to our strategic financial partnership with Orascom Telecom. ... With Orascom's online media properties, international scale and contacts, we look forward to rolling out Speak2Me in international markets," Lingo chief executive officer Michael Kraft added in the release.

Each special warrant sold in the placement will be exchangeable for a unit of one common share and a three-quarters-share warrant.

The whole two-year warrants are exercisable at C$4.00 in the first year, at C$6.00 for the following six months and at C$8.00 thereafter and are callable 120 days after the closing date, if the company's common shares trade at or above 50% above the warrant strike price for 10 consecutive trading days.

At closing, the proceeds were deposited in escrow in an interest bearing account and the special warrants were distributed to an escrow agent.

The special warrants will only become convertible, and the escrowed funds released from escrow, following the date Lingo Media receives shareholder approval for the financing, Orascom Telecom's nominee for election to Lingo's board of directors is elected onto the board and the closing conditions are satisfied.

If the release conditions are not satisfied in four months, the company will buy back the special warrants.

Proceeds will be used for Lingo Media's ongoing development, maintenance and operation of Speak2Me's web portal and for general working capital.

Lingo's shares (TSX Venture: LM) fell 5.56%, or 10 cents, to close at C$1.70 Thursday.

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