The Blackstone Group L.P. (NYSE:BX) has settled a lawsuit brought against it by a group of investors for $85 million. The suit related to the company’s misrepresentation of certain investments to the public in the lead up to its initial public offering in 2007. According to the New York Times, the legal settlement was filed in a Manhattan court on on Wednesday.
The case rested on the value that The Blackstone Group L.P. (NYSE:BX) put on three of its investments in the lead up to its 2007 IPO. According to the New York Times report on the settlement, the agreement means that the company will avoid a securities class-action trial that was set to begin in September.
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The group of investors who sued the company filed the complaint that led to this settlement in April of 2008. The legal process that ended today went through many twists and turns. The suit was thrown out by the original Judge who saw it, but was reinstated in early 2011.
The complaint centered around three private equity investments at The Blackstone Group L.P. (NYSE:BX). They were disclosed as an insurer, a real estate company, and a semiconductor manufacturer. The investors argued that these investments were losing value at the time of the IPO, and that fact was not disclosed by the company at the time of the IPO.
Today’s settlement does not mean that The Blackstone Group L.P. (NYSE:BX) admits fault, but it is beneficial to the company. A class action trial based on the same complaint could have cost the company a lot more than $85 million if they had lost. Today’s settlement seems more of a bargain and the market seems inclined to agree. Shares in the company are up close to 2% on today’s trading.
$4.1 billion Blackstone IPO
The Blackstone Group L.P. (NYSE:BX) went public back in June 2007 for $4.1 billion. The IPO set the high point for private equity investors whose importance declined in the 2008 financial crisis. That crisis was not kind to The Blackstone Group L.P. (NYSE:BX). The company’s shares are still trading more than 35% below their IPO price today.
From the company’s IPO day shares fell quickly. The initial $31 per share asking price had fallen to around $21.50 by the beginning of September, and reached a low of below $4 per share in early 2009. Since then shares have recovered to around $22, still far below the original price paid on IPO day.