What is the end result of all this? Corporations (or the firms providing their directors and officers insurance policies) must devote a huge amount of time any money to dealing with these suits. Do shareholders see money from these suits? Hardly ever, and the real losers are the shareholders who must see the company's equity continue to be eaten up by legal fees.

Of course, in cases of securities fraud, shareholders should use the legal process to seek restitution. But losing money is a risk of investing, particularly in fad products and companies like Heelys. Here are some of the risk factors the company included in its prospectus:

We depend primarily upon sales from a single product line and the absence of continued demand for our products would have a material adverse effect on our net sales and results of operations.

Because we are a consumer products company, if we fail to accurately forecast consumer demand and trends in consumer preferences, our HEELYS brand, net sales, customer relationships, and results of operations may be adversely affected.

We do not have long-term contracts with any of our retail customers or independent distributors, and the loss or material reduction in their business with us could result in reduced sales of our products.

Due to the inherent risk of injury related to the use of our products, our business exposes us to claims for product liability and warranty claims if our products actually or allegedly fail to perform as expected, or the use of our products results or is alleged to result in personal injury, disability or death. There can be no assurance that we will be able to successfully defend or settle the product liability claims and lawsuits to which we are and in the future may be subject.

Heelys seems to have fallen victim to all of these risks that were clearly outlined in the prospectus, and investors should take their lumps and move on. No one is served well by this pattern of seemingly automated litigation in the wake of poorly performing IPOs.