A JPMorgan fund is in talks to acquire a substantial stake in Twitter, one of the fastest-growing social networking sites.
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Twitter
The fund hopes to acquire 10 percent of the online messaging service for $450 million, valuing Twitter at $4.5 billion, according to people familiar with the plans.
It is not clear if the JPMorgan fund will make a direct investment or buy out existing investors and shareholders with Twitter’s approval.
But the fund does not intend to buy shares on the secondary market, the people said.
The deal has not closed.
JPMorgan’s Digital Growth Fund was established this month to give rich clients exposure to fast-growing private tech companies, and follows a similar effort by Goldman Sachs to invest in Facebook.
The fund has raised $1.22 billion to date, according to a filing with the Securities and Exchange Commission. But it plans to raise $1.3 billion in total, and will have a maximum of 480 investors, say the people.
JPMorgan expects to earn commission of at least $13 million from the fund. 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.
The final third of the fund will be allocated among six other companies, they said – possibly to include coupons site LivingSocial, or Gilt, the flash-sales site.
Twitter will be the fund’s focus. The company has 253 million unique users per month, up 85 percent from a year ago, according to venture capital firm Kleiner Perkins Caufield & Byers.
Internet market research firm eMarketer expects revenues to reach $150 million this year. Kleiner Perkins invested $200 million in Twitter in December at a $3.7 billion valuation.
The JPMorgan valuation of $4.5 billion would mark a swift rise in value, and could aggravate concern about of a new tech bubble.
Facebook is now worth up to $70 billion on the secondary market, a price considered too rich for the JPMorgan fund, said people familiar with the plans.
JPMorgan, Twitter, Skype, Gilt and LivingSocial all declined to comment.