FarmVille developer Zynga IPO could raise $2 billion, report says

NEW YORK ― Online social game company Zynga plans to raise $1.5 billion to $2 billion in an initial public offering and could file paperwork with U.S. regulators as soon as Wednesday, a source familiar with the situation said Tuesday.

Zynga, the company behind a series of popular games on Facebook including FarmVille and Mafia Wars, has more than 215 million monthly active users, according to its website.

It is the top games publisher on Facebook and its revenue mainly comes from selling virtual items such as tractors and weapons in games that users can play on their computers.

Its IPO would be the latest in a string of social media companies to take advantage of rebounding equity markets.

Zynga is expected to float only a small portion of its shares and the IPO could value the company as high as $15 billion to $20 billion, the source said.

Morgan Stanley is expected to lead underwriters on the IPO, with Goldman Sachs, Bank of America Merrill Lynch, Barclays and JPMorgan also expected to be among the underwriters, the source said.

The source declined to be named because the information is not public. The banks and Zynga declined to comment.

Zynga has also held talks with banks about a big credit facility that would be undrawn, a separate source said.

The credit facility is expected to be at least $1 billion, according to CNBC, which first reported the details of Zynga’s planned IPO filing.Zynga would follow LinkedIn Corp and China’s Renren Inc, which were the first social media companies to test the public markets in May. Today, LinkedIn is above its IPO price, but down from its highs, while Renren has lost nearly half of its value since its IPO.

Some investors are already expecting Zynga’s IPO to surpass LinkedIn’s because of its steady revenue stream.

A few months ago, Zynga’s annual revenue was estimated to be about $1 billion, according to Sterne Agee analyst Arvind Bhatia who has said that the number could be higher now. This estimate would be higher than LinkedIn’s annual revenue.