Steckman

BACKGROUND

Pyramid Breweries Inc., formerly Hart Brewing Inc., a maker of craft beers, conducted an initial, public offering on December' 13, 1995, less than three weeks before the end of the fourth quarter. Shares were priced at $19, netting the company $34.2 million.

According to Pyramid’s uncontested prospectus, gross sales grew at a compound annual rate of around 88% from 1990 to the *1295 end of the third quarter 1995. Operating income grew at a compound annual rate of 200% from 1990 through 1994. The prospectus also disclosed that income was merely 83% higher for the first three quarters of 1995 compared to the same period in 1994, thus suggesting a slowdown at Pyramid.

Pyramid’s annual production capacity grew from 9,300 barrels in 1990 to almost 160,000 barrels at the time of the offering. The company had an annual capacity of 87,000 in 1994 and 72,100 barrels were shipped (83% of capacity); its capacity for the first three quarters of 1995 was 152,300 barrels, of which 89,100 were shipped (58.5% of capacity). Id. at 15. In other words, the company disclosed in its selected financial data that it had nearly doubled capacity in 1995, and that the amount of beer it…