Michael Andretti - Bommarito Automotive Group 500 - By: Karl Zemlin/Penske Entertainment

IndyCar: Andretti SPAC Bets on AI With Zapata Merger

Andretti Acquisition Corp.  has entered into a definitive agreement to combine with generative AI company Zapata.

AI Software will be critical to Andretti Global when they finally enter Formula 1.

Zapata AI has agreed to go public on the New York Stock Exchange through a $283 million merger with Andretti Acquisition Corp, a special purpose acquisition company (SPAC) owned by American racing legend Michael Andretti.

Andretti’s SPAC deal is expected to provide up to $84 million to Zapata’s balance sheet, and the new combined company has received a pre-money equity value of $200 million. Boston-based Zapata spun out of Harvard University in 2017, and the company’s AI tools run language and numeric models for partnered clients such as Amazon, Google, IBM, Nvidia, and DARPA.

Andretti Global, Michael’s racing organization that recently rebranded from Andretti Autosport, has teams across IndyCar, Formula E, and Extreme E that have an existing partnership with Zapata.

Zapata has developed technology to use quantum computing and numerical data to generate text and data for industrial applications.

Those teams use Zapata’s AI software Orquestra to analyze tire degradation, fuel-saving opportunities, and run predictive models to help improve strategies during races. Racing teams commonly partner with AI companies to get an engineering edge, such as McLaren’s similar deal with DataRobot.

Andretti has about $84.2 million in its current trust after seeing 65.6% of shares redeemed thus far and it expects this to be further reduced to about $50 million by close. It expects to supplement this with $20 million in senior convertible notes that would be priced at a 15% discount to ordinary shares.

Zapata expects to add $48 million to its balance sheet through the deal after paying $12 million in transaction expenses with $10 million specifically set aside for growth capital purposes.

Assuming about 40% of Andretti’s remaining trust is redeemed, Zapata shareholders would own 61% of the combined company at close with public Andretti shareholders taking a 14.3% stake. Note investors would own 7.2% and Andretti’s sponsor would see its promote shares convert to a 17.5% stake.

The sponsor’s stake is subject to adjustments, however. Although the deal does not carry a minimum cash condition, 30% of Andretti’s promote shares will become unvested if the final closing cash is less than $10 million. If it is between $10 million $25 million, then Andretti will unvest a proportionate amount of shares between 0% and 30%, but if closing cash comes in at $25 million or higher, the whole promote will vest.

“Zapata AI’s industrial generative AI solutions have demonstrated their applicability helping enterprises across a range of industries solve complex problems and make better business decisions,” said Andretti in a statement. “We have experienced this firsthand in the AI-driven race strategy solutions and advanced analytics capabilities they are delivering to Andretti Autosport.”

Andretti’s SPAC plans to complete its Zapata merger by the first quarter of 2024. The company will be listed under the stock symbol “ZPTA,” and is aiming to capitalize on the generative AI craze that’s projected by PwC to help push the broader AI economy to $15.7 billion by 2030. Zapata previously raised $4.8 million in July, and a previous $38 million Series B in November 2020.

“We believe generative AI is shaping a once-in-a-generation opportunity, and the capital and relationships afforded through this business combination will only strengthen our market position,” Zapata AI CEO Christopher Savoie said in a press release.

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