A Federal Court of Appeals reinstated a lawsuit that accuses Blackstone Group are adequately disclose in its IPO documents - claims that echoes an often-heard criticism of the opaque business results of listed private equity companies.
It is also accused Blackstone by omitting information about weakness in the housing market that was hurting her real estate investments.
For example, reports Blackstone little information on the financial results for its biggest investment, Hilton Worldwide.
Court's language suggests that private equity firms should disclose more information about their portfolio firms.
Blackstone's lawyers had argued that these investments were immaterial to the private equity firm's overall performance and that in any event, their weakness offset by gains in other portfolio companies.
The appeals court rejected this argument, analogizing Blackstone and its portfolio companies to a traditional public company that has many different business units. With regard to allegations of Blackstone's incorrect information about weakness in the housing market, said the court, the shareholders also had a plausible claim. The appellate court rejected this argument.
Blackstone's I.P.O. came as the private equity boom was cresting. Blackstone and Fortress Investment Group became the first private equity firms to go public.
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