Blind pool is a limited partnership that is set up for investment, but doesn’t specify what companies the general partner plans to invest in. A blind pool basically sells securities to the public without them knowing what exactly their money is going towards. In some cases, the blind pool knows exactly what investments they plan to make with the investors money, but choose not to disclose this information in fear that potential investors might be scared away if they knew too many details.
Blind pools are typically most popular during prosperous times. During these times, investors become less concerned with considering alternative investments and are more willing to put their money into investments they do not fully understand. This can be a very dangerous practice.
Most blind pools exist for the purpose of reverse acquisition. This occurs when a private company arranges to be taken over by a blind pool investment vehicle. The private company then becomes public without going through the lengthy regulatory steps of filing with the SEC. After the reverse acquisition, the price of the stock skyrockets which then gives the blind pool promoters the opportunity to sell off their stock. This leaves the blind pool investors in a bad spot since the stock rarely stays at the overinflated price due to poor management and capital shortages. Investing in a blind pool is extremely risky so it should be approached with caution. It is more like gambling than actual investing.