JP Morgan Chase & Co. (JPM) created a social media fund that is rumored to be in talks to buy a 10% stake in Twitter. The New York Times’ Dealbook reports:
JPMorgan Chase’s new fund aimed at investing in social media companies is seeking to buy a minority stake in Twitter that could value the service at close to $4.5 billion, people briefed on the matter said Sunday.
For the $1.22 billion JPMorgan fund, Twitter appears to be its beachhead in the highly popular social media sector, much as Goldman Sachs established its presence in the category by raising $1.5 billion to invest in Facebook, an amount that included $1 billion collected from wealthy private individuals outside the United States.
Though the markets appeared to shrug off the news of a potential deal, sending shares up just 0.02% in Monday’s (2/28) trading, JPM in fact performed well compared to its peers. Goldman Sachs Group, Inc (GS) fell 0.60% and Morgan Stanley (MS) fell 0.64%.
The blogosphere was abuzz with news about the rumoured acquisition. Here is some of the better commentary:
- Rich Price for This Tweet-y Bird – Rolfe Winkler (Wall Street Journal): “Unlike other hot Internet companies, such as Facebook, Groupon and Zynga, Twitter is still struggling to establish a lucrative business model. Lately, it has had success selling advertisers placement on its list of trending topics on the site—for as much as $120,000 a day, estimates Debra Williamson of eMarketer. Even so, Ms. Williamson estimates Twitter will generate just $150 million in revenue in 2011. Compare that to Facebook’s $4 billion.”
- Reports: J.P. Morgan Chase in talks for Twitter stake – Steven Musil (CNet): “Twitter completed a $200 million funding round in December–led by investment firm Kleiner Perkins Caulfield & Byers–that gave the company at a $3.7 billion valuation. The funding was expected to be use to ramp up engineering resources to support a growing user base and allow early employees to cash out some company stock.”
- How Chris Sacca and J.P. Morgan Acquired 10% of Twitter Via Huge Secret Secondary Fund – Michael Arrington (TechCrunch): “J.P. Morgan owns no Twitter shares directly. They have, however, committed the bulk of capital in a secretive new $1+ billion fund by angel investor Chris Sacca. Over the last several months, that fund has acquired around $400 million in Twitter stock from current shareholders, at prices ranging from $16 – $21/share. At $21/share, that implies a Twitter valuation of $4.5 billion. That fund is now the second largest shareholder of Twitter, say our sources.”
- JPMorgan fund eyes 10% stake in Twitter – David Gelles (Financial Times): “Besides the Twitter stake, JPMorgan hopes to invest another third of the fund in one other private web company – possibly games maker Zynga or telephony provider Skype.”
Covestor models that hold JPM as of end of day 2/28 – click through for more info on the models:
- Large Cap from Gator Capital
- Large Cap Value from Bristlecone Value Partners LLC
- Financial Services from Andrew Schornack
- Bottom-Up Analysis and Bottom-Up Analysis Aggressive from Epic Advisors are both SHORT JPM
Sources:
“JPMorgan Fund Seeks Minority Stake in Twitter” Michael De La Merced and Andrew Ross Sorkin. The New York Times Dealbook, 2/27/2011. http://dealbook.nytimes.com/2011/02/27/jpmorgan-fund-seeks-minority-stake-in-twitter/
