What is a Blind Pool?

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

One of the advantages of a blind pool is that it allows a group of investors to come together for the purpose of creating a corporate entity that can actively seek opportunities that will result in the creation of profit for all the partners. While the blind pool does not come together around a central investment or product, there are a number of examples of public companies that developed one key good or service over time. At a later date, the blind pool would add new goods or services to the roster of products offered, with the additional products having some sort of relationship to the core offering. In other cases, the blind pool would include an eclectic selection of products that are all sold under the auspices of one company, but cultivate profits in a variety of different markets.

During the decade of 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 the shares in the control of the partners involved with the blind pool. The split would be followed by issuing new shares of stock that could be purchased and used to acquire a controlling interest in the new public company. While the process tended to appear to be a workable approach on paper, the actual practice could often lead to the partners losing money on the operation. As a result, the blind pool is discouraged as an investment strategy in a number of 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.