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 on 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.

Bhatia said in a recent interview that Zynga should move quickly to go public because of the current market appetite for IPOs of Internet-based companies and that if it waits six months, the conditions may not be as favorable.

Zynga could tap into investors' growing frustration with traditional videogame companies, which have seen their share prices eroded in recent years. Zynga's games have been eating into the $60.4 billion global video game industry -- which largely consists of action or sports games played on consoles and TV sets.

Zynga, however, faces the same pitfalls as many video game companies, including the risk that interest in its games could drop off and shift toward a competitor's wares.

Competitors of Zynga have also been preparing to file IPOs of their own, which could crowd the market. PopCap Games, which makes Facebook games, told Reuters earlier this year it was preparing to file by the end of the summer.

Earlier this month, online radio company Pandora Media Inc raised the proposed value of its IPO by almost 50 percent. Two days after Pandora's stock debuted, it handed back its gains and was down nearly 20 percent.

Also this month, online daily deal site Groupon raced to file its IPO. The company said it wants to raise up to $750 million. Groupon disclosed in its filing that its staffing ballooned to more than 7,000 employees at the end of March from 37 in June 2009.

Investors are also setting their sights on IPOs for social media networks Facebook and Twitter.

(Additional reporting by Clare Baldwin and Liana Baker. Editing by Robert MacMillan, Bernard Orr)

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