UPDATE 2-Blackstone wins dismissal of lawsuit over IPO

* Plaintiffs failed to state claim for recovery

* Alleged misstatements not material

* Blackstone delighted with ruling

* Shares of Blackstone rise 1.5 percent
(Adds details of ruling, judge's comments, details of IPO,
other background)

By Jonathan Stempel

NEW YORK, Sept 22 (Reuters) - Blackstone Group LP (BX.N)
won dismissal on Tuesday of an investor class-action lawsuit
accusing the private equity firm of failing to disclose prior
to its 2007 initial public offering that some of its holdings
were losing value.

In a 15-page ruling, U.S. District Judge Harold Baer in
Manhattan said the plaintiffs failed to state a claim upon
which they could recover. He dismissed the case with prejudice,
meaning the plaintiffs cannot bring their claims again.

Lawyers for the plaintiffs did not immediately return
requests for comment. A Blackstone spokesman said the New
York-based firm was "delighted" with Baer's decision.

Blackstone offered about 153 million common units at $31
each when it went public in June 2007, on the cusp of what
would become a global credit crisis.

The price of the units, however, fell to about $7 by the
time the plaintiffs filed their amended complaint in October
2008. The units closed up 21 cents, or 1.5 percent, at $14.66
on Tuesday on the New York Stock Exchange.

The plaintiffs said Blackstone did not disclose at the time
of its IPO that some holdings "were not performing well and
were of declining value." They said this limited the potential
for Blackstone to collect performance fees, and raised the
chance that fees could be "clawed back" by limited partners.

The alleged problem holdings included a $331 million
investment in FGIC, a bond insurer hurt by subprime mortgages;
a $3.1 billion investment in Freescale Semiconductor Inc
[FSLSM.UL], which would lose a key contract with Motorola Inc
MOT.N, and some real estate investments, court papers show.

Baer said Blackstone's exposures to FGIC and to Freescale
fell short of being "material," reflecting their size relative
to Blackstone's $88.4 billion of overall assets, and the fact
that IPO investors could benefit from better performance at
some of Blackstone's 41 other portfolio companies.

The judge also said the plaintiffs failed to show a link
between problems in the residential housing market in late 2006
and early 2007 with Blackstone's real estate investments, 85
percent of which were in commercial and hotel properties.

"It may well be that as sophisticated real estate investors
Blackstone should have known that the problems in the real
estate and credit markets were not limited to subprime
residential mortgages," the judge wrote, "but this is not
enough."

The case is Landmen Partners Inc v. Blackstone Group LP,
U.S. District Court, Southern District of New York (Manhattan),
No. 08-3601.
(Reporting by Jonathan Stempel; Additional reporting by Megan
Davies; editing by Andre Grenon and Matthew Lewis)