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.
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.