The court has rendered a $10 million judgment against Canadian company Danier Leather, Inc., (Toronto:DL.TO) in favor of investors who purchased the company’s common stock pursuant to the its May 1998 IPO. The action alleged that the defendants intentionally misled the investing public with an inaccurate prospectus, when it predicted it would have $17.4-million in fourth-quarter revenue and a $384,000 loss in fiscal year 1998. Persons eligible to take part in the action should contact attorneys for the class as soon as possible.

The case stems from Danier's $65-million initial public offering in May, 1998. Two weeks after the deal closed, the company warned that "unseasonably warm weather" had melted sales of its leather goods. It revised its forecast for the fiscal fourth quarter that ended in late June 1998, and the stock fell 29% in the next four days, leaving investors sitting on millions in paper losses.

The matter might have ended there but for the tenacity of Mr. Rick Durst, who thought something didn't seem right. He pursued it; six years later, he is on the winning end of a court decision that said Danier management gave "misleading" projections as it went public.

The decision could affect anyone who hopes to cash in on the Canadian IPO market, where sunny forecasts are all part of the show. You can hardly pick up a prospectus without finding charts and tables that show the company's financials going up, up, up. They're usually littered, too, with esoteric measures such as "pro forma profit" or "adjusted EBITDA" or whatever will put the best shine on the numbers. Then come the risk factors -- the more legalese the better, lest anyone actually want to understand them.

Those games will continue, but the judge has made it clear investors are entitled to the facts -- all the facts, please, and not just the ones that make the company look good. Danier, like most modern retailers, has sophisticated computer systems to help it track sales and inventory on a daily basis. By the time the IPO officially closed on May 20, 1998, Danier executives knew that business was much slower than they had hoped. They allegedly chose not to release this potentially damaging information. It wasn't until June 4, 1998, that they gave investors a much gloomier outlook: $12.6 million in fourth-quarter revenue and a $1.1 million loss.

The court ruled that Danier management had failed to do a proper analysis of its revenue trends in the days before the IPO, and should have informed investors about the sluggish sales. "As of May 16, just prior to closing, Danier knew that it had the daunting task of having to achieve another $9-million in revenue in the final six weeks of the quarter in order to achieve forecast," the judge said in the decision. "Given the sheer magnitude of revenue that was required . . . This information should have been disclosed prior to the closing of the IPO."

The court ruled that investors who bought shares in the IPO and sold them in the immediate aftermath of Danier's profit warning are entitled get their losses back. Those who held on to their stock were awarded $2.35 a share in damages. The decision is worth more than $450,000 to Mr. Durst, 50, a retired Bay Street financier who divides his time between Toronto and Milford Bay, Ontario.

The money will not be distributed until all possible appeals have been exhausted.