JP Morgan is putting a several hundred million dollars of its richest clients’ money into Twitter through the J.P. Morgan Digital Growth Fund.
Through this fund, “JP Morgan plans to invest in companies with established business models and steady revenue before they go public in widely anticipated stock sales,” reports the New York Times.
Twitter has neither of those things – an “established” business model or “steady” revenue.
So why is JP Morgan really putting money in?
- Twitter may not have big, growing revenues, but its core product is one that tens of millions of people love. Many media professionals also depend on Twitter. When there is love and dependence, it’s basically impossible to not make money eventually. (Sometimes it happens, though. AIM and WordPress come to mind.)
- There’s always the greater fool strategy. Maybe Google will finally decide it needs Twitter to defend itself from Facebook.
- JP Morgan expects to collect $13 million in commissions no matter Twitter’s outcome. Revenues or no, Twitter is buzzy enough to attract investors into plunking down $250,000 a pop. Who cares if the thing is a real business?