What is a blind pool?

Each investor involved in a company’s blind pool is free to pursue other business interests.

As a form of limited partnership popular in recent decades, the blind pool is an arrangement that allows the creation of a publicly traded company that is not limited to a single purpose. Each investor in the company is considered a general partner, free to pursue other business interests and must be open to diversification when it comes to investments made by the company.

One of the advantages of the blind pool is that it allows a group of investors to come together with the objective of forming a legal entity that can actively seek opportunities that result in the generation of profit for all partners. While the blind pool does not revolve around a core investment or product, there are several examples of public companies that have developed an important good or service over time. At a later date, the blind pool would add new goods or services to the list of products offered, with the additional products having some sort of relationship to the main offering. In other cases, the blind pool would include an eclectic selection of products that are sold under the auspices of one company but grow profits in a variety of different markets.

During the 1980s, the use of a blind pool was a common method of taking a private company public. Often, the process would involve a reverse split of shares in the control of the partners involved with the blind pool. The split would be followed by the issuance of new shares that could be purchased and used to acquire controlling interest in the new publicly traded company. While the process tended to look like a viable approach on paper, the actual practice could often cause partners to lose money on the transaction. As a result, blind pooling is discouraged as an investment strategy in many countries around the world. In the United States, the Securities and Exchange Commission now actively opposes the use of blind pools as a means of taking a private company public.

Leave a Comment