In a SEC filing, JP Morgan Chase says it has raised $1.2 billion for a Digital Growth Fund that will invest in social media-related companies that have already established viable business models and revenue streams but have yet to undergo initial public offerings. The primary targets: Twitter, Zynga, Skype, LinkedIn and Groupon.
The irony, of course, is that these companies have no need of JP Morgan’s capital. The investors that have funded these social media companies – New Enterprise Associates in Groupon, Accel Partners and Kleiner Perkins in Twitter, Google and Softbank in Zynga – are flush with cash and would ante up more money if their portfolio companies are in need.
However, JP Morgan’s cash could help them increase the value of their investments. So although Twitter was valued at $3.7 billion in December, JP Morgan expects to invest $450 million at a $4.5 billion valuation. So if JP Morgan chooses to play it could end up investing at lofty valuations that offer little real value to investors but help spike the valuations of the venture funds that have invested in these social media companies. ....