Blind pool
From Wikipedia, the free encyclopedia
Blind pool offerings are investment vehicles that raise capital by selling securities through an IPO to public investors without telling those investors the specific use of the proceeds. Blind pools are often undercapitalized having the only assets as what it will gain from a public offering.
The most common form of blind pool is a “blank check” offering. Blank check offerings do not identify the general industry where funds will be invested. Blank checks are just that, they allow the company to invest the money wherever they chose.
Blind pools are also often characterized by an absence of managerial and technical expertise; thus, it is important for investors to know who the promoters are and their background and knowledge (or lack of).
Private firms can enter into talks with a blind pool for a reverse takeover or merger, where the private firm would then become the surviving entity in the transaction. In addition, it would become a public company without all the scrutiny and delay associated with the underwriting normally exercised by the Securities and Exchange Commission (SEC) and state/regional governments.
Blind pools originated in England about 280 years ago. They surfaced in America during the stock market boom in the 1920s.
