A class action lawsuit against one of the world’s preeminent buyout firms has been given new life following a Thursday court ruling. A US appeals court reversed an earlier decision dismissing investor allegations the Steve Schwarzman-led Blackstone Group failed to adequately disclose its risks ahead of its IPO in June 2007.
Plaintiffs argued Blackstone failed to mention in IPO documents problems experienced by two of the group’s portfolio companies as well as some of its real estate holdings.
Blackstone’s share price fell to $9.14 the week investors filed their complaint in October 2008, a 70 percent drop from its June 2007 issue price of $31 per unit.
In September 2009 a district court granted Blackstone’s request to dismiss the complaint—ruling the problem investments were immaterial, accounting for only a small share of the group’s $88 billion operation. The appeals court disagreed, deciding investors “plausibly allege” Blackstone omitted material information to investors, regardless of the investment’s contribution to the firm’s overall performance.
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