Because the Puppet Tool only works successfully on bitmapped layers. Don't use it on shape layers.
Puppet Pin works just fine on shape layers.
Make sure you have the comp with puppet pin nested and that you moved all attributes to the new composition (I don't think there is any other choice with Puppet Pin) and make sure the collapse transformations are turned OFF in the main comp. It should work just fine.
If you apply puppet pin to any layer you cannot then animate any transform or distortion property on that layer because Puppet Pin is based on the first frame of the layer. Change the position or look of that first frame down the timeline and everything will fall apart.
Turning on Collapse transformations is guaranteed to foul things up with puppet pin because it will bypass the effect and you will end up with no movement.
Yes it was the collapse transformation that would be OFF. I have had similar things and thought I tested this now but apparently not.