Zynga Inc. is in talks to have Goldman Sachs Group Inc. (GS) lead its initial public offering and provide a credit line of more than $1 billion to help make acquisitions, said a person with knowledge of the matter.
Goldman Sachs is expected to make a decision by today, said the person, who asked not to be named because the announcement hasn’t been made public. Zynga, the largest maker of games for Facebook Inc.’s site, is preparing to file for an IPO by the end of this month, the person said.
Social-media companies are lining up for IPOs after shares of LinkedIn Corp., the largest professional-networking site, more than doubled in their debut two weeks ago. Groupon Inc., the biggest online coupon site, announced plans yesterday to raise up to $750 million in an IPO, and music streaming service Pandora Media Inc. is seeking as much as $123.2 million.
As of early last week, Zynga had met with representatives of Goldman Sachs and Morgan Stanley (MS), both based in New York, and was close to choosing bankers, a person familiar with the matter said at the time. Morgan Stanley, Goldman Sachs and Credit Suisse Group AG are underwriting Groupon’s IPO.
Dani Dudeck, a spokeswoman for San Francisco-based Zynga, declined to comment, as did Andrea Rachman, a spokeswoman for Goldman Sachs.
Zynga has 242.1 million monthly active users on Facebook, more than six times as many as the second-biggest developer, according to research firm AppData.com. The company owns three of the four most popular apps on the site -- “CityVille,” “FarmVille” and “Texas HoldEm Poker.”
The games are free to play, with the company making money by selling digital -- or virtual -- goods within the apps and letting players pay to reach higher levels. The worldwide virtual-goods market is expected to more than double to $20.3 billion in 2014, from $9.28 billion last year, according to ThinkEquity LLC, a San Francisco-based research firm.
Zynga has acquired at least 10 companies in the past year, helping it expand beyond Facebook games and into smartphone apps. The company bought Newtoy Inc., maker of “Words With Friends,” in December. Four months later, it acquired Wonderland Software, creator of “GodFinger.”
Zynga is valued at $8.2 billion on SharesPost Inc., an exchange that connects buyers and sellers of privately held companies. That makes it the second-most valuable U.S. game company, after Activision Blizzard Inc. Electronic Arts Inc. is third, at $8.1 billion on the Nasdaq Stock Market. Zynga recently hired former Electronic Arts Chief Operating Officer John Schappert for a senior role.
Zynga is backed by venture firms Foundry Group, Union Square Ventures, Kleiner Perkins Caufield & Byers, Institutional Venture Partners and Andreessen Horowitz. Russia’s Digital Sky Technologies and Google Inc. are also stakeholders. In February, Zynga was in talks to raise funding at a valuation of about $10 billion from T. Rowe Price Group Inc. and Fidelity Investments, two people familiar with the matter said at the time.