Zapata AI races into agreement with Andretti SPAC to go public
Zapata AI, the Boston-based company formerly called Zapata Computing, is planning to become a publicly-traded firm via a merger with Andretti Acquisition Corp. (NYSE: WNNR), a publicly-traded special purpose acquisition company (SPAC).
The transaction puts “an implied pre-money equity value of $200 million” on the company, and is expected to close in the first quarter of 2024, according to a Zapata AI news release. The combined company is expected to be listed on the New York Stock Exchange under the new ticker symbol “ZPTA”.
The deal would make Zapata AI at least the fifth quantum-related company to go public via a SPAC transaction, following Arqit Quantum, IonQ, Rigetti Computing, and D-Wave Quantum. Of those, IonQ, Rigetti, and D-Wave often are described as “pure-play” quantum computing companies. Meanwhile, Zapata AI, which was called Zapata Computing after it was spun out of Harvard University in 2017 and at least until a few months ago, seems to have grabbed the generative AI bull by the horns in recent months, rebranding AI into its name and market messaging at a time when AI model and application development is booming and driving stock market investors to pour their money into clear AI leaders like Nvidia.
In any case, it is hard to argue the notion that while quantum computing–and some combination of quantum computing and AI–certainly represent the future, AI itself, and particularly generative AI, is very much a star of the present.
Zapata AI noted in its release announcing the SPAC transaction and IPO plan that the company will continue to have a mission “to create significant value for enterprises with generative AI and other advanced algorithms that leverage quantum techniques.” It further stated that the firm’s “proprietary quantum techniques run on classical (non-quantum) hardware such as CPUs and GPUs—and have the potential to revolutionize existing AI solutions by making them cheaper, faster and more accurate.”
Zapata AI said its offerings “include Zapata AI Prose, a large language model generative AI solution, and Zapata AI Sense, which generates new analytics solutions to complex industry problems. These industrial solutions, which uniquely process both text and numbers, run on Zapata AI’s full-stack Quantum AI software platform, Orquestra, enabling the company to train and deliver AI models within customers’ hybrid cloud and multi-cloud environments, including Microsoft Azure, AWS, and others.”
“Our engineers and scientists have spent years building, testing and refining our proprietary software to put Zapata AI—and our customers—at the forefront of the generative AI revolution,” said Christopher Savoie, CEO of Zapata AI. “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. We are participating in an enormous total addressable market where we have the potential to create disproportionate value for our customers and our investors.”
If the Zapata-Andretti connection sounds familiar that is because the two companies (Zapata AI was then Zapata Computing) embarked on a multi-million-dollar effort in 2022 to explore quantum computing use cases for auto racing. The Andretti Acquisition Corp. SPAC was founded in 2021.
Michael Andretti, Co-CEO of Andretti Acquisition Corp., commented, “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 – we have experienced this firsthand in the AI-driven race strategy solutions and advanced analytics capabilities they are delivering to Andretti Autosport. The company is already working with some of the world’s largest and most recognizable organizations, and based on our understanding of its vast capabilities, compelling go-to-market strategy and ambitious growth plan, we believe there is tremendous enterprise revenue opportunity.”
Transaction Details
The Zapata AI release stated that as part of the planned SPAC transaction, Zapata shareholders are “set to roll over 100% of their equity into the combined entity, or 20.0 million shares at a price of $10.00. Andretti Acquisition Corp.’s sponsors and certain investors that own or have the right to receive founder shares will own a combined 5.8 million shares, or an implied value of approximately $58 million. Andretti Acquisition Corp.’s public shareholders currently hold approximately 7.9 million shares, all of which are subject to redemption. The pro forma equity value of the combined company (inclusive of the remaining cash in trust at Andretti Acquisition Corp. after redemptions) is expected to be between $281 million and $365 million, depending on the level of redemptions.”
Redemption levels are one of the tricky aspects of SPAC transactions, as the ultimate windfall for the combined company after a SPAC merger can vary widely depending on how high that redemption level is (as explained in the 2022 Reuters story). That can impact the resulting combined firm’s financial health, its risk profile for other investors, and any plans it has for how it wants to invest proceeds from its merger and public market debut. For example, last May, Rigetti founder and former CEO Chad Rigetti admitted that his company received proceeds from its SPAC deal that were lower than the company expected, and that its technology development would be impacted as a result.
Dan O’Shea has covered telecommunications and related topics including semiconductors, sensors, retail systems, digital payments and quantum computing/technology for over 25 years.
Image credit: Andretti Autosport
