How Chris Sacca And J.P. Morgan Acquired 10% Of Twitter Via Huge Secret Secondary Fund

Lots and lots of buzz today in all the major newspapers about how J.P. Morgan is trying to buy 10% or so of Twitter for $450 million.

As far as I can tell, all of the stories are wrong. In particular, say my sources, Twitter isn’t negotiating with anyone – J.P. Morgan or otherwise – about a new funding round. The last round with Kleiner Perkins seems to have more than satisfied their near term capital appetite. Also, J.P. Morgan isn’t currently trying to buy Twitter shares through the secondary market, either, say my sources. That’s because they already indirectly own 10% of Twitter.

Here’s what’s really going on, as far as I can tell from sources:

J.P. Morgan owns no Twitter shares directly. They have, however, committed the bulk of capital in a secretive new $1+ billion fund by angel investor Chris Sacca. Over the last several months, that fund has acquired around $400 million in Twitter stock from current shareholders, at prices ranging from $16 – $21/share. At $21/share, that implies a Twitter valuation of $4.5 billion.

That fund is now the second largest shareholder of Twitter, say our sources. Cofounder Evan Williams is the largest shareholder.

Who’s sold all that stock to Sacca? They bought $100 million from Williams, sources say, beating out General Atlantic in a bidding war for the shares. Early investors Union Square Ventures and Spark Capital make up most of the remaining $300 million, as well as some other employees.

Of note, the recent $80 million Twitter stock purchase by Andreessen Horowitz was actually done through a rival fund controlled by angel investor Ron Conway.

The fund still has some $700 million in fresh capital to spend, and it’s clearly aiming at investing in other companies, too. They’ve expressed interest in buying shares in Facebook, Zynga and other companies, we’ve heard. That makes them a very real competitive fund to DST, which has purchased primary and secondary shares in Facebook, Zynga, and Groupon to date.

Twitter image

Location: San Francisco, California, United States
Founded: March 21, 2006
Funding: $360M

Twitter, founded by Jack Dorsey, Biz Stone, and Evan Williams in March 2006 (launched publicly in July 2006), is a social networking and micro-blogging… Learn More

Chris Sacca image

Birthplace: Buffalo, NY

Omnisio, MotionDSP, Speedera Networks, RescueTime, Someecards, Charles River Ventures, Clickpass, Twitter, Auctomatic, Lookout, Heroku, International Creative Management, Summit Entertainment, path intelligence, Lowercase Capital, Tipjoy, Photobucket (Old),, FanBridge, Twilio, Poll Everywhere, Gowalla, Universal Record Database, Posterous, Hello Chair, 280 North, and more

An accomplished venture investor, private equity principal, company advisor, entrepreneur, and public speaker, Chris manages a portfolio of over three-dozen consumer web, mobile, and wireless technology start-ups as well as an array of mature… Learn More

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