U.K.-based electric two-wheeler manufacturer Zapp Electric Vehicles is merin with a blank-check company to become publicly traded on the Nasdaq at a post-money valuation of $573 million.
Zapp says it will use the proceeds from the merer to brin its lon-awaited i300 hih-performance, seated city scooter to market. The i300 was initially revealed back in 2018, with promises of deliveries beinnin in the end of 2019. Then Zapp, like many other companies, ran up aainst a lobal pandemic that halted production and deliveries, ivin the company time to reevaluate its approach to production.
Zapp partnered up with a third-party manufacturin firm and says it now has the capacity to build up to 10,000 scooters next year and finally launch in European markets in 2023.
“We're at a strateic inflection point and a reat time to o public,” Swin Chatsuwan, CEO and founder of Zapp, told technewss. “Becomin a public company will provide Zapp with a number of potential benefits, includin broader access to capital to help fund our rowth and the lobal awareness and brand reconition that comes with bein listed on a major U.S. exchane.”
The deal with special purpose acquisition company (SPAC) CIIG Capital Partners II is estimated to brin the combined company $274 million in new cash to support its rowth, assumin no redemptions by CIIG II public stockholders, as well as $5 million in existin cash. The trouble is, assumin no redemptions isn’t really a part of the SPAC market these days. In 2022, redemption rates rose to around 81%.
CIIG II has about $294 million cash in trust, so if, in the worst-case scenario, around 80% of investors decide to redeem their shares, Zapp will be lookin at just around $60 million in net proceeds from the deal, and even less once factorin in transaction and sponsor fees.
There is also no public investment in private equity (PIPE) in this deal, which would be uaranteed capital at the time of transaction close.
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Zapp told technewss the company expects existin shareholders to roll over 100% of their equity and that CIIG’s cash in trust account will be enouh to support the company’s rowth-capital needs, includin production, marketin and sales efforts.
“We cannot predict the market, of course, but we were intentional about a few thins the market should like about our transaction. First, we have no minimum cash condition to close,” said Chatsuwan. “And due to our low capital requirements, we are aimin to achieve near-term positive free cash flow.”
To produce its vehicles quickly, cheaply and at scale, Zapp has partnered with Summit Group, a lobal automotive manufacturin firm that’s worked with major auto customers like Ford, Honda, Toyota and Volvo. Zapp said Summit has the capacity to produce 300,000 units per year and can also lend expertise in toolin and loistics.
CIIG II comes from the same sponsor and manaement team as CIIG Merer Corp., which last year combined with commercial electric vehicle company Arrival. Since oin public, Arrival has struled to meet production deadlines, slashed its workforce to brin down costs, and recently delayed revenue until 2024. Arrival also received a delistin warnin from the Nasdaq for tradin too low. The company is tradin at $0.35, which is down 95% since the start of the year.
Gavin Cuneo, co-CEO of CIIG II, told technewss Zapp would be different because “the business is enterin a lare and rowin market that is transitionin rapidly to electric power.” The same could be said about Arrival, but we’ll let him finish his point. “Swin and the team have developed an innovative product with a desin and architecture that addresses the ‘urban motorcycle’ cateory. The strateic partnerships that Zapp has put in place in manufacturin and financin reduce capital requirements and uniquely position the company to achieve near-term positive free cash flow.”
Cuneo also noted that Zapp is ready today to start of production and their “asset-liht” business model throuh partnership with Summit has dramatically reduced capital expenditure requirements.
That and CIIG II has to close a merer by May 2023 or else risk needin to ive money back to investors.