The investment bank and financial services provider JP Morgan, has announced that it has set up a fund to purchase an interest in Twitter Inc. It clearly sees the social networking site as having potential and hopes to buy 400 million shares for around $450 million to get a 10 per cent stake in the company; the full value of the company has been put at $4.5 billion. Twitter began in 2006 and since then has built up over 175 million registered users who tweet in excess of 95 million messages every day.

JP Morgan has set up what it calls its Digital Growth Fund' (DGF) which enables clients to contribute money which is then invested in various private companies in what the bank sees as having growth potential. It has said to the US Securities and Exchange Commission (SEC) that it has so far raised over $1.2 billion for the fund. JP Morgan staff then use money from the fund to invest in different companies taking a fee for managing the fund on clients' behalf. Estimates put the fees at around $13 million. 

At present Twitter is still a private company and is not listed on the secondary market so if JP Morgan wants to buy shares in the company it has to do so by persuading private investors to sell their shares and seek the approval of Twitter to do so. While some of the $1.3 billion JP Morgan intends to raise for its DGF will come from private investors (its clients) the company is also intending to use some of its own money to contribute to the fund.

The remainder of the fund will be used to invest in other companies the bank thinks have potential. Names that have been rumoured to be in the frame include Skype, Zynga (a social network games developer based in San Francisco), Living Social, a site which sends registered users a 'discounted deal' each day at local businesses such as cinemas, theaters, restaurants and spas and Gilt Groupe, a site which sends members offers on a wide range of products including fashion and accessories which are made available at a 'sale' which lasts for a limited period of time and is available on a first-come-first-served basis.