A group of Blackstone Group LP (BX.N) investors has appealed the dismissal of their class-action lawsuit seeking to hold the private equity firm responsible for their losses on its stock.

The appeal to the U.S. Court of Appeals for the Second Circuit came after Judge Harold Baer of Manhattan federal court last month said the plaintiffs had failed to state a claim on which they could recover.

The plaintiffs had alleged that prior to its initial public offering, Blackstone failed to disclose that investments in bond insurer FGIC, Freescale Semiconductor Inc [FSLSM.UL] and real estate were losing value.

Blackstone went public in June 2007 at $31 per common unit. The price of the units had fallen to about $7 by the time the plaintiffs filed their amended complaint in October 2008.

Baer concluded that Blackstone's exposure to FGIC and to Freescale fell short of being material. He also said the plaintiffs failed to show a link between known problems in residential housing in late 2006 and early 2007 and Blackstone's investments in commercial and hotel properties.

Blackstone units rose 12 cents to $15.94 in morning trading on the New York Stock Exchange.

The case is Landmen Partners Inc v. Blackstone Group LP, U.S. District Court, Southern District of New York, No. 08-3601.

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