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JPMorgan negotiating to take minority stake in Twitter

February 28, 2011 — 11:30am ET | By Jason Ankeny

Financial services giant JPMorgan Chase reportedly is in deep talks to acquire a minority stake in Twitter that would vault the social interaction network's valuation to close to $4.5 billion. Citing sources briefed on the discussions, The New York Times reports the proposed Twitter deal would be made via the J.P. Morgan Digital Growth Fund, a fledgling social media growth fund valued at $1.22 billion, although it is unclear whether the firm will invest directly in Twitter or acquire current investors' stakes with the startup's consent. Both JPMorgan Chase and Twitter declined comment, and sources add that talks between the two sides are still ongoing, without a firm commitment in place.

Insiders say Twitter also remains the target of intense acquisition interest, with Silicon Valley giants Google (NASDAQ:GOOG) and Facebook reportedly among the companies in low-level discussions to purchase the company. Citing sources familiar with the talks, The Wall Street Journal stated earlier this month that discussions with Twitter suitors have yielded an estimated value between $8 billion and $10 billion--insiders say Twitter generated 2010 revenues of $45 million but lost money as a result of spending on hiring and data centers, while 2011 revenues are expected to reach the $100 million to $110 million range. Despite the valuations, the negotiations have so far gone nowhere, sources add.

Twitter closed a $200 million funding round led by Kleiner Perkins Caufield & Byers in December 2010. Twitter raised $100 million in September 2009, when users totaled about 25 million--T. Rowe Price Group Inc., Insight Venture Partners, Spark Capital and Institutional Venture Partners all contributed to the round. At that time, the startup was valued at about $1 billion. This month, venture capital firm Andreessen Horowitz said it had purchased over $80 million of Twitter shares through exchanges for private-company stock; the firm declined to specify what percentage of Twitter those shares represent.

Twitter now boasts more than 175 million registered users worldwide. According to CEO Dick Costolo, users sent more than 25 billion tweets in 2010, with more than 100 million new registered accounts signing on during the same period. Sixteen percent of all new users begin tweeting on mobile devices, and 46 percent of all active users now make mobile a staple of their Twitter experience.

For more:
- read this New York Times article