JPMorgan Chase is looking to get in on the social media buzz by starting an investment fund dedicated to digital companies. The bank will reportedly collect hundreds of millions of dollars from wealthy investors, and buy into internet companies with "established business models," including a possible $200 million investment in Twitter. The creation of the fund may signal that JPMorgan is "taking a page from Goldman Sachs" in trying to get "the inside track" with these fast-growing companies. Smart investment, or another sign of an inflating tech bubble?
This time is different: Banks have learned their lesson from the last tech bubble, says David Weidner in MarketWatch. They're focusing only on internet businesses that "are profitable and growing." So while the social media landscape still has plenty of risks — remember Friendster and MySpace? — and the valuations here can "push the boundaries," at least it's a better bet than in the '90s. There won't be any "Webvans, Boo.coms, open.coms or sock puppets" among the businesses getting money.
"J.P. Morgan looks for friend$"
JPMorgan is giving clients what they want: Investors "can't get enough of social media," says Agustino Fontevecchia in Forbes. Yes, the valuations being placed on tech darlings like Facebook, Twitter, and Groupon — and even lesser-known names such as online game developer Zynga — "have been exploding." And yes, skepticism has been building among observers concerned about a "possible bubble." But as long as there's demand from investors, this frenzy won't cool down anytime soon.
"JPMorgan starting 'Social Media Fund' to invest in Twitter, Facebook, and other private companies"
There's nothing new about this 'overhyped' fund: Despite the copious amounts of ink being spilled to write about it, "this fund is remarkably unimportant," says Dan Primack in Fortune. Similar funds were created last year, and there's no reason to think JPMorgan's investments will "be any better than those of its peers" — especially since the fund doesn't actually have a deal to buy into Twitter. JPMorgan isn't even putting its own money into the fund. All in all, this fund is simply "overhyped."
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