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Securities Regulation, Keyed to Choi
Litwin v. Blackstone Group, L.P.
Citation:
634 F.3d 706 (2011)Facts
The Blackstone Group, L.P., one of the world’s largest alternative asset managers with $88.4 billion in assets under management, conducted an initial public offering on June 21, 2007, raising over $4.5 billion through the sale of 153 million common units. Blackstone’s business was divided into four segments: Corporate Private Equity (37.4% of assets), Real Estate (22.6%), Marketable Alternative Asset Management, and Financial Advisory. Plaintiffs alleged that Blackstone’s registration statement and prospectus omitted material information about problems affecting two significant portfolio companies and its real estate investments. Specifically, FGIC Corporation, in which Blackstone held a 23% equity interest worth approximately $331 million, had significant exposure to sub-prime mortgage-backed securities through credit default swaps totaling nearly $13 billion. Freescale Semiconductor, representing Blackstone’s largest single investment at $3.1 billion (9.4% of the Corporate Private Equity segment), had lost its exclusive manufacturing agreement with its largest customer, Motorola, in March 2007. Additionally, Blackstone’s real estate segment, constituting 22.6% of total assets under management, faced exposure to the deteriorating residential real estate market. Following the IPO, Blackstone announced significant write-downs, including a $122.2 million reduction in FGIC’s value, which accounted for 69% of the decline in Corporate Private Equity segment revenues for 2007.
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