Zynga Secures $1 Billion Cushion
By NICK WINGFIELD
Wall Street Journal
August 12, 2011
Zynga Inc. raised a $1 billion line of credit in July from Morgan Stanley, Goldman Sachs and other banks, according to a Thursday filing with securities regulators.
The move could give San Francisco-based Zynga—a startup that produces "FarmVille," "CityVille" and other popular games on Facebook—a financial cushion if continued market turbulence forces it to delay an initial public offering.
Zynga didn't indicate whether recent stock market woes would affect an IPO.
Zynga's new filing, an amended S-1 document for its initial public offering, also disclosed how the company has been valued in the past, prior to the recent market tumult. In March, Zynga said a "third-party valuation report" indicated Zynga's worth was $11.15 billion, according to its filing. Just one month earlier, another third party valuation report indicated Zynga's value was less than half that, at $4.98 billion.
Zynga didn't identify the third party that provided the valuation report but says "arms-length transactions" in Zynga stock provided the "primary indication" of the company's value. People familiar with the matter said Zynga had planned, when it filed for its IPO in July, to seek a valuation of between $15 billion and $20 billion.
The company didn't provide any update on whether recent stock market woes, which have forced other companies to delay their offerings, will have any impact on Zynga. A company spokeswoman declined to comment. The company filed its initial IPO papers in early July.
Zynga also disclosed an accounting mistake in the filing during the first quarter of the year, leading to a $7.5 million increase in revenue for the period and a reduction in deferred revenue by the corresponding $7.5 million. Zynga said the snafu resulted when the company didn't hew to accounting standards covering estimates of how long people play Zynga's video games. The company said it believes it has fixed the problem.
Absent from the latest filing was any reference to one notable shareholder, DST Global Ltd., the Russian investment firm headed by Yuri Milner, which held 5.8% of Zynga's class B shares in an earlier Zynga filing. A spokesman for DST said the firm's shares were split between DST and Mail.ru after the two separated from each other, and their resulting stakes are now lower than the 5% threshold for disclosing ownership in a company. The spokesman said neither firm has sold Zynga shares.
In March, Zynga said the company's management estimated the "probability of an initial public offering in the future at 80%, strategic sale at 5%, and continued operations at 15%" basing those predictions on the company's financial and operating performance and improving market conditions.
The Wall Street Journal had reported in late June that Zynga was in talks with banks about a line of credit. Zynga reached the agreement July 21 with its lenders, listing Morgan Stanley as the administrative agent for a group of banks on the deal, its new filing says.
—Shira Ovide and Anupreeta Das contributed to this article. Write to Nick Wingfield at nick.wingfield@wsj.com
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