A JP Morgan media fund is considering buying a substantial stake in social networking site Twitter.com. Sources say the fund hopes to acquire 10% of the micro-blogging site for $450m. The investment puts Twitter's total value at $4.5bn or £2.8bn. However, it is not clear if the JPMorgan fund will make a direct investment or buy out existing investors and shareholders with Twitter's approval. The talks come as JP Morgan (NYSE:JPM) has so far raised $1.22bn for a new Digital Growth Fund, launched to give the bank's clients access to new media and private technology companies.
The fund's target size is $1.3bn. Rumours are rife that the fund could also invest in games maker Zynga or internet-phone service Skype.
Twitter has enjoyed explosive growth since it was launched in 2006. According to venture capital group Kleiner Perkins Caufield & Byers, the website has 253m unique users each month, 85% higher than the number who visited this time last year. The JP Morgan investment would raise Twitter's valuation by a further $800m - or 21.7% - raising further questions over whether a new technology bubble is being created.
The Telegraph readers are not convinced: springmellon writes:
"Twitter has never made a profit and for most of its existence, did not even have any revenue. From what I can gather it has struggled to even find a model to make a profit, and revenue from advertising for the last six months of 2010 was only approximately £30 million. I assume the plan of JP Morgan is to inflate this bubble company in the hope of flogging it off to some fool before it goes belly up."
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