T. Rowe, Morgan Stanley funds sitting on whopper Twitter gains

Wed Nov 6, 2013 5:18pm EST
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By Tim McLaughlin and Ross Kerber

BOSTON (Reuters) - Mutual funds run by T. Rowe Price Group Inc and Morgan Stanley are poised to send one sweet tweet.

These early investors in Twitter Inc will reap exponential gains as the microblogging site goes public, while latecomers struggle for share allocations.

T. Rowe's New Horizons and Growth Stock funds may come out looking smartest, having scooped up millions of preferred shares for a pittance.

While mutual funds put the vast majority of investors' assets into shares of publicly traded companies, some actively managed funds jostle for additional upside by trying to get a piece of promising companies years before they go public.

From its inception in 2006 through the end of September, Twitter completed several rounds of equity financing as a private company by issuing convertible preferred stock that raised $759 million.

Such early-stage fund raising rounds once were typically reserved for venture capitalists and private equity firms but in recent years have been opened to mutual funds. Their seed investments have led to success stories like the gains reaped by Fidelity Investments on Facebook shares acquired before the social network's went public last year.

At the end of June, T. Rowe's $14.3 billion New Horizons Fund reported holding 4.6 million Twitter shares that cost $2.66 apiece. Those shares could be worth $115 million or more when the dust settles on Twitter's stock market debut on Thursday on the New York Stock Exchange.

Twitter is likely to price its IPO above the $25 top end of the range announced on Monday, according to sources familiar with the process.   Continued...

The corporate logo of financial firm Morgan Stanley is pictured on a building in San Diego, California September 24, 2013. REUTERS/Mike Blake