For years we've advised investors to be extremely cautious when it comes to IPOs, because first and foremost IPOs are financing activities for companies -- a way for them to raise money. There is always time to wait a few years and see how a company performs before buying shares. The occasional exception to this rule is spinoffs from other public companies, which generally come with a long history of data.

Otis Spunkmeyer, which has filed a registration statement and sells frozen cookie dough, muffins, and other baked goods to customers such as Subway, Target (NYSE:TGT), and Costco (NASDAQ:COST), does not appear to be an exception to the rule. While the price per share for Otis Spunkmeyer's IPO is to be determined, the transaction looks very much like a financing event for the company and not one that investors should be excited about.

The company's primary use for the cash to be raised in the offering is to pay down portions of its debt at 18.5% and 19.5% interest and to redeem its preferred shares. Going public to pay down the debt makes a great deal of sense for the business, but as this debt was taken on by management and other backers to finance the purchase of this company, I see this sale primarily as an opportunity for them to recoup their investment. As an aside, I do find it a bit interesting that Otis Spunkmeyer will lower its cost of capital by issuing equity to pay down its very high-interest debt.

Looking at the financials of the company, I'm uninspired. Until 2005, the company failed to cover the interest on its debt with operating earnings and the company has deep-pocketed competitors in Sara Lee (NYSE:SLE), General Mills (NYSE:GIS), and other large packaged food companies. The company's 15.7% of revenue from Subway and reliance on large retailers such as Target and Costco is also a concern.

There are lots of good reasons to go public that I can see for the current owners of Otis Spunkmeyer and for the health of the company in general. However, I can't imagine a reason for me, as an individual investor, to be committing funds to buying these shares in an IPO or shortly thereafter. There are simply too many companies in this arena with long track records and well-known management teams that are trading at reasonable valuations for me to chase this IPO.

Sara Lee is a Motley Fool Income Investor selection and Costco is a Motley Fool Stock Advisor selection. Check out our suite of investing newsletters with a 30-day free trial.

At the time of publication, Nathan Parmelee owned shares in Costco, but had no interest in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.