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Twitter deal feeds speculation of tech bubble

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JP Morgan is in talks to buy a stake in micro-blogging website Twitter, the Financial Times has reported.

The banking firm aims to acquire ten per cent of the social networking website for $450m (€327m). This deal would value the company at $4.5bn, two months after  Kleiner Perkins led a funding round that valued Twitter at $3.7bn.

This month JP Morgan launched its Digital Growth Fund, which has so far raised $1.22bn, to give rich clients an opportunity to invest in fast-growing private tech companies. Last month Goldman Sachs set up a special purpose vehicle for high-net-worth individuals to invest in Facebook.

Demand for investing in pre-IPO tech companies has led to speculation of a second tech bubble. “There is a growing feeling that the current new investors will dump the stock on a gullible public on an IPO. Or they will play the usual round of ‘pass the parcel’. As long as you are not the last one holding the stock,” Richard Holway, a tech analyst at TechMarket View, wrote today.

In addition to the stake in Twitter, JP Morgan is looking to invest another third of the fund in a different tech company, likely to be Zynga or Skype, while the final third will be invested in six other companies, such as social buying websites LivingSocial or Gilt Groupe. 

Click here to read more about private-company share deals for tech companies. 

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