It's game on for Zynga initial public offering

Reuters News
Posted: Nov 30, 2011 2:33 PM
It's game on for Zynga initial public offering

by Anthony Hughes and Robert Sherwood

NEW YORK, Nov 30 (IFR) - Zynga is preparing to launch its much-anticipated IPO on Monday for expected pricing on Thursday, December 15.

The social gaming company is expected to file terms on Friday for an IPO that would generate around US$900m in proceeds, though underwriters may ultimately upsize the deal based on demand, according to a source involved in the process.

The timetable suggests the banks will opt for a standard nine-day all-US roadshow, paving the way for a Nasdaq debut on Friday, December 16.

Zynga, which expects to offer both primary and secondary stock, is thought to be targeting a pricing range of US$8-$10 a share, according to the source.

The company, best known for its popular FarmVille and CityVille games, most recently valued its equity at US$14.05bn.

It first filed plans to go public on July 1, 2011, flagging an offering in the order of US$1bn at that time.

Morgan Stanley and Goldman Sachs are joint bookrunners on the deal, with Bank of America Merrill Lynch, Barclays Capital, JP Morgan and Allen & Company also named in the syndicate as co-managers.

underwriting committees at the banks involved are finalizing their participation in the offer.

Prior to the IPO, Zynga founder Mark Pincus owned 16% of Zynga's Class B shares (91.4m) and 100% of its Class C shares.

The IPO will see Zynga's capital structure divided into three classes of stock, with Class A stock sold to new investors entitled to one vote per share, Class B entitled to seven votes per share and Class C entitled to 70 votes, though Class B and Class C shares will be convertible at any time into Class A stock.

Zynga's games have 54m daily active users and 227m monthly active users in 175 countries, mostly via games accessible on Facebook.

The company is on track to become one of the fastest Silicon Valley companies ever to turn over more than US$1bn a year in revenue. Founded in 2007, the company increased its annual revenue from US$19.4m in 2008 to US$597.5m in 2010, and generated revenue of US$828.9m in the nine months to September 30, 2011. Over the same period, net income was US$30.7m and adjusted EBITDA US$235.5m.

Gaming peers Electronic Arts and Activision Blizzard trade at 2 to 3 times revenue but have relatively little exposure to the fast-growing business of social gaming.

(Reporting by IFR's Anthony Hughes and Robert Sherwood)