Dismissal of Blackstone IPO Suit Provides a Lesson on Disclosure Issues

Dismissal of Blackstone IPO Suit Provides a Lesson on Disclosure Issues - 9-24-2009

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News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

DISMISSAL NEWS:

Dismissal of Blackstone IPO Suit Provides a Lesson on Disclosure Issues
Susan Beck

The American Lawyer. September 24, 2009
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EXCERPT: The topic du jour in the corporate world is securities disclosure, what with the Bank of America controversy making headlines nearly every day. The law isn't always crystal clear on just what a company needs to disclose, and how. Today we point you to a recent court opinion that gives some guidance on disclosure issues that were raised by shareholders of The Blackstone Group L.P., after its $4.5 billion IPO in 2007. The ruling, issued Tuesday, was a resounding win for Blackstone and its lawyers at Simpson Thacher & Bartlett, with the court dismissing the complaint with prejudice. We're willing to bet that everyone involved in BofA's disclosure troubles will read this closely. Plaintiff Landman Partners Inc. had brought a putative class action in April 2008 alleging that Blackstone failed to disclose at the time of its IPO that certain of its portfolio companies were not performing well, and that Blackstone misrepresented the condition of the real estate market in general. In his ruling, Manhattan Federal District Court Judge Harold Baer Jr. held that any omissions or misstatements were not material, and did not violate the Securities Act of 1933. The judge noted that there is no bright-line test for material omissions. Still, the court noted that the 2nd Circuit has stated that a good starting point for this analysis is whether a misstatement caused a financial error of less than 5 percent. Applying that test, the court noted that FGIC, one of the poorly performing portfolio companies at issue, represented only 0.4 percent of Blackstone's assets under management at the time of the IPO. Freescale Semiconductor, another portfolio company, represented just 3.6 percent of the assets under management.

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