Blind pool is a limited partnership that creates a public company without a single purpose, allowing investors to pursue other interests. It seeks opportunities for profit creation and may add new products or services. Blind pools were popular in the 1980s but are now discouraged as an investment strategy.
As a form of limited partnership that was popular in decades past, blind pool is an arrangement that allows for the creation of a public company that is not limited to a single purpose. Every investor in the firm is considered a general partner, is free to pursue other business interests, and should be open to diversification when it comes to investments made by the firm.
One benefit of a blind pool is that it allows a group of investors to come together for the purpose of creating a business entity that can actively seek out opportunities that will result in profit creation for all partners. While the blind pool does not gather around a central investment or product, there are numerous examples of public companies that have developed a key good or service over time. At a later stage, the blind pool would add new goods or services to the roster of product offerings, with the additional products bearing some sort of relationship to the main 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 which 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 controlling partners involved in the blind pool. The demerger would be followed by the issuance of new shares which could be purchased and used to acquire a controlling interest in the new public company. While the process tended to look like a viable approach on paper, the actual practice could often lead to partners losing money on the deal. 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 actively opposes the use of blind pools as a means of taking a private company public.
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