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Zynga sets IPO price range

by Lou Whiteman | Published December 2, 2011 at 11:30 AM

Internet gaming company Zynga Inc. set the price range for a scaled-back public offering on Friday, Dec. 2, saying in a regulatory filing it would offer 100 million shares at between $8.50 to $10 apiece.

San Francisco-based Zynga, which rose to prominence as a maker of games that run inside Facebook Inc., could still raise up to $1 billion in the IPO, which would be the largest in the tech space since Google Inc. raised $1.9 billion, including over-allotments, in 2004. But the implied valuation from the offering of between $7.7 billion and $9.04 billion is down from estimates contained in previous filings, in which the company's value was projected at up to $14 billion.

Recent tech IPOs have hit a rough market. Both Groupon Inc. and Pandora Media Inc. have fallen in the weeks since their debuts, a potential factor in Zynga scaling back its expectations.

Zynga is selling all of the 100 million shares, expecting net proceeds of about $889 million to add to its existing $604.2 million cash balance. Underwriters have the option of buying 15 million additional shares from Zynga investors including Avalon Ventures, Foundry Group, Institutional Venture Partners, Union Square Ventures, Kleiner Perkins Caufield & Byers, Google and Silver Lake Partners.

Company founder and CEO Mark Pincus, who is not selling any shares in the offering, would control 37% of the voting shares in Zynga post-offering.

In its filing, Zynga said it had about 6.7 million paying customers during the nine months ending Sept. 30, up from 5.1 million paying customers in the first nine months of 2010. Customers are spending more, with sales climbing to $828.9 million in the first three quarters of the year from $401.7 million in the prior period. The company has generated net income of $30.7 million so far this year.

Morgan Stanley, Goldman, Sachs & Co., Bank of America Merrill Lynch, Barclays Capital, J.P. Morgan and Allen & Co. LLC are listed as underwriters on the offering. A Cooley LLP team including Eric C. Jensen, Kenneth L. Guernsey and John T. McKenna is advising the company, while Keith F. Higgins and Brian C. Erb of Ropes & Gray LLP are serving as underwriter's counsel.

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