Selling common shares before an initial public offering is usually indicative of some illegal activity. But in rare occurrences, companies are able to offer shares to investors, but not trade them publicly. Such was the case with home-equity and subprime lender Saxon Capital Inc., which recently filed to raise $321 million in an IPO, but whose shares had already been sold three months ago.

When Saxon's former parent, Dominion Resources, merged with Consolidated Natural Gas Co. in 2000, the company became subject to the Public Utility Holding Co. Act of 1939, requiring that any public utility company must siphon off unrelated businesses within three years after a merger. For Dominion, this meant spinning off its financial services divisions, which included Dominion Capital as well as Saxon.

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