According to headlines this morning, JPMorgan Chase is trying acquire a 10 percent stake of Twitter for about $450 million:
- J.P. Morgan fund in talks to buy Twitter stake: report (DealBook-New York Times)
- J.P. Morgan Fund Seeks Minority Stake in Twitter (Reuters)
- J.P. Morgan May Buy 10% of Twitter (Daily Finance)
Michael Arrington, with his network of sources among Silicon Valley investors and a spidey sense for these things says that's not the case. J.P. Morgan wouldn't be in talks to take a 10 percent stake in Twitter... because J.P. Morgan already owns about that much of Twitter.
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. Cofounder Evan Williams is the largest shareholder.
J.P. Morgan filed regulatory documents last week that revealed it has raised $1.22 billion for a fund called J.P. Morgan Digital Growth Fund LP that would invest in Internet and media companies. The fund was quickly dubbed the "Social-Media Fund" or "Twitter Fund." In January, Goldman Sachs raised $1 billion to buy a significant stake in Facebook.
Arrington's hypothesis of the latest Twitter investment, indicates J.P. Morgan did a bit of an end-run around the traditional Silicon Valley investing apparatus.
J.P. Morgan acquired the shares (estimated at $400 million) through a series of angle-investors and markets for shares of privately held companies that are drawing increasing scrutiny from regulators. The SEC is already investigating sales of Twitter, Facebook stock for conflicts of interest, writes DigitalTrends.
A consolidation to shares by a traditional Wall Street firm like J.P. Morgan is likely to draw even more scrutiny of these markets.
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