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A Quick Take On Andretti Acquisition
Andretti Acquisition Corp. (NYSE:WNNR) has raised $200 million from an IPO at a price of $10.00 per unit, according to the terms of its most recent S-1/A regulatory filing.
The SPAC (Special Purpose Acquisition Company) intends to pursue a merger with a company in the sectors of:
opportunities that can benefit from the iconic Andretti brand name, both inside and outside of the worldwide motor sports platform, and the expertise and ability of its management team to identify, acquire and grow a business in the broadly-defined automotive industry. This industry includes, but is not limited to, advanced mobility and related next-generation technologies, premium and performance vehicles and replacement automotive parts.
The motorsports industry has performed well during the pandemic, but Andretti leadership doesn’t have previous SPAC experience.
I’m on Hold for the WNNR SPAC.
Andretti Sponsor Background
Andretti has 2 executives leading its sponsor, Andretti Sponsor LLC.
The sponsor is headed by:
– Co-CEO and Chairman Willian J. Sandbrook, who was previously president, Chairman and CEO of U.S. Concrete.
– Co-CEO and Director Michael M. Andretti, who is an experienced race car driver and has owned Andretti Autosport, which fields racing car teams in a variety of series, including the NTT IndyCar Series.
The SPAC is the first vehicle by this executive group.
Andretti Acquisition’s Market
According to a 2022 market research report by Market Data Forecast, the global market for motorsports was an estimated $4.8 billion in 2021 and is forecast to reach $7.8 billion by 2026.
This represents a forecast CAGR of 7.2% from 2021 to 2026.
The main drivers for this expected growth are a rising popularity of new forms of motorsport, including electric propulsion vehicles and growing broadcasting coverage.
Also, automotive vehicle manufacturers have sought to increase their brand recognition through sports activities, although the increasing cost of participation in some forms of motorsports has been a hindrance to some.
Andretti’s SPAC IPO Terms
Indianapolis, Indiana-based Andretti sold 20 million units of units of Class A stock and one-half of one redeemable public warrant at a price of $10.00 per unit for gross proceeds of approximately $200 million, not including the sale of customary underwriter options.
The IPO also provided for 1/2 warrant per share, exercisable at $_ per share on 30 days after the completion of our initial business combination from the closing of an initial business combination, and expiring 5 years after completion of the initial business combination or earlier upon redemption or liquidation.
The SPAC has 24 months to complete a merger (initial business combination). If it fails to do so, shareholders will be able to redeem their shares/units for the remaining proceeds from the IPO held in trust.
Stock trading symbols include:
Founder shares are 20% of the total shares and consist of Class B shares.
The SPAC sponsor and Sponsor Co-Investor also purchased a total of 13.55 million warrants at $1.00 per warrant in a private placement. Each warrant will entitle the sponsor to purchase one share of A common stock at $115.0 per share but have transfer restrictions that the public warrants do not have.
Conditions to the SPAC completing an initial business combination include a requirement to purchase one or more businesses equal to 80% of the net assets of the SPAC and a majority of voting interests voting for the proposed combination.
The SPAC may issue additional stock/units to effect a contemplated merger. If it does, then the Class B shares would be increased to retain the sponsor’s 20% equity ownership position.
Commentary About Andretti Acquisition
The SPAC is interesting because it’s the Andretti family’s first foray into public markets for their likely racing expansion plans.
The management team includes Michael Andretti, probably the most business-oriented member of the Andretti family, with extensive racing and management experience in the racing industry.
But, while the SPAC leadership has impeccable management experience, the team does not have a track record in the SPAC vehicle industry, so that’s a negative aspect of this opportunity.
Overall, the global motorsports industry has shown remarkable resilience during the pandemic. Although there was a drop off in in-person attendance during the worst of the COVID-19 pandemic, attendance has come back significantly, likely due to the outdoor nature of motorsports reducing the risk of racegoers contracting COVID in the outdoors.
Investing in a SPAC before a proposed business combination is announced is essentially investing in the senior executives of the SPAC, their ability to create value, and their previous SPAC track record of returns to shareholders.
So, in a sense, investing in a SPAC can be likened to investing in a venture capital firm as a limited partner.
The cost of that investment is roughly the same, 20% of the upside to the SPAC sponsor, but the time frame for realizing a significant gain can be far faster, a 1- to 3-year time period for a SPAC versus 10 or more years for a typical venture capital fund.
In the case of this particular management group, there isn’t any previous SPAC track record.
With so many SPACs to choose from, it’s important for investors to be choosy. While a case could be made for the Andretti SPAC if investors look through the SPAC to the motorsports industry’s growth prospects, execution risk is still there.
It was rumored that Andretti wanted to acquire the Formula One Alpha Romeo team in recent months, but that deal didn’t happen for undisclosed reasons.
While I’m a racing fan and believe that the motorsports industry has a bright future ahead of it, I’m on Hold for the Andretti SPAC.
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