Updated from 10:23 a.m. EDT

About 300 companies whose shares were allegedly manipulated during the IPO craze settled with investors for $1 billion Thursday, but plaintiffs' lawyers say the deal is just the first step toward a much bigger payday.

Because of the way it's structured, the tentative deal with 309 companies represents only a guarantee if plaintiffs can't collect from their real quarry: 55 Wall Street firms that underwrote and marketed the deals.

"We've always been of the mindset that the primary targets are the underwriting community,'' said Melvyn Weiss, a partner with Milberg Weiss Bershad Hynes & Lerach, the big class-action firm heading up the phalanx of law firms bringing the litigation. "The issuers are on the bottom of the ladder of wrongdoing.''

The lawsuit alleges that every major Wall Street investment bank, including Goldman Sachs ( GS), Citigroup ( C) and Merrill Lynch ( MER), conspired with more than 300 start-ups -- overwhelmingly Internet companies -- to manipulate the IPO market during the bull market.

The suit contends the investment banks defrauded investors by artificially inflating the value of dot-com IPOs for companies such as Ask Jeeves, iVillage, Razorfish and theGlobe.com, publishing bullish reports to prop up those stocks and striking deals with institutional investors to encourage them to buy shares of those companies in the aftermarket. The litigation is a massive one involving nearly a thousand corporate and individual defendants.

TheStreet.com ( TSCM), which publishes this Web site, was also part of the settlement.

Much remains to be worked out in the proposed deal before it will be submitted to the court for approval. But the lawyers said they've reached an agreement in principle with the 309 companies, their officers and directors and their insurers to settle the first phase of the case.

Under the deal, about 40 insurers would pay $1 billion to the plaintiffs and their lawyers. But in doing so, the companies are assigning any legal claims they may have against the Wall Street firms to the plaintiffs. In addition, if the plaintiff lawyer obtains either a judgment or settlement greater than $1 billion from the Wall Street banks, the insurers wouldn't owe a cent.

In other words, the $1 billion is a minimum guaranteed payment to the plaintiffs. And to help the plaintiffs put the squeeze on Wall Street, the companies and their officers have entered into a cooperation agreement with the plaintiffs' lawyers.

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