Blackstone to settle IPO lawsuit with $85m payment

The investor class action lawsuit was brought by a group of investors that had accused the firm of not disclosing some bad investments ahead of its New York Stock Exchange flotation, Reuters reported.

The consortium of investors filed a lawsuit against Blackstone, as well as its chairman Stephen Schwarzman, just over a year after the private equity firm went public. The group claimed that Blackstone did not properly represent the value of certain investments – namely a bond insurer, a real estate company and a semiconductor manufacturer, according to the New York Times – because the businesses were already losing value when the GP debuted on the stock exchange.

Blackstone's settlement, filed on Wednesday in Federal District Court in Manhattan, reportedly means that the GP has avoided a securities class action trial, which was due to begin in September. A securities class action is filed by investors who purchased a company's debt or equity within a class period and have subsequently suffered a financial loss, due to a significant negative public disclosure about the company during the class period that caused a drop in the company's stock price.

Blackstone's initial price per share at the time of its IPO was $31. By the time the group of investors reportedly filed an amended complaint in October 2008, shares were trading at a low of approximately $7 per unit. Shares closed yesterday on $22.05 on the NYSE.

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