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The IPO of Zi Toprun Acquisition Corp. is it a good investment? • Benzinga


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Acquisition of Zi TopRun (NASDAQ: ZTOPU)





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Following a sharp loss of sentiment towards new public listings – exacerbated by black swan events such as Russia’s invasion of Ukraine – this segment of the capital markets is gradually returning to earlier norms. However, the growing enthusiasm also includes special purpose acquisition companies (SPACs) like Zi Toprun Acquisition Corp.which raises important questions.

Primarily, post-merger SPACs have not performed well this year, lagging benchmark equity indices. Another issue is that the market as a whole is under heavy selling pressure. As a myriad of headwinds coalesced into a formidable storm, the main talking point is inflation. With households suffering from the rising cost of living, fewer consumer dollars are available for businesses, which is causing difficulties in several industries.

At the same time, it wouldn’t be fair to lump all SPACs into the same (sinking) boat. Although the segment is extremely dangerous based on recent trends, Zi Toprun has the potential to go against the grain due to its relevant primary objective: to seek a merger target within the broader transportation industry. , including sub-segments like batteries and automated driving.

Indeed, if Zi Toprun ends up merging with an automation company, it could help alleviate some of the major challenges of the post-COVID-19 era, particularly the truck driver attrition rate. Yet ambitious companies carry a burden of credibility, which means you shouldn’t expose yourself too heavily to risky ventures.

What does Zi Toprun do?

Zi Toprun is a SPAC, which is a special class of shell company or blank check company. Rather than pitching its own company to public investors, a SPAC launches an initial public offering (IPO) — or the first time a private company distributes its stock to retail buyers — as a shell entity. Once listed on the stock exchange, the sponsors of SPAC then look for a hopefully viable company to merge with.

If investors approve the merger, SPAC and the target firm enter into a business combination, with the latter providing the business while the former facilitates access to the capital market. The SPAC identity dissolves, with the entity being absorbed into the target’s corporate identity.

One of the disadvantages of investing in SPACs before the merger is that you don’t know what you’re getting into until the merger announcement. However, Zi Toprun provides some clues with a focus on transportation. Additionally, it specifically mentioned these segments in its Form S-1 filing with the United States Securities and Exchange Commission (SEC):

  • Battery or charging companies: Although not specifically detailed, this implies that these sectors involve the booming electric vehicle (EV) industry. If so, Zi Toprun would tie into a high-growth market. According to Precedence Research, the size of the electric vehicle battery market could be worth almost $560 billion by 2030, representing a compound annual growth rate (CAGR) of 32% from 2022 to the projected year.
  • Autonomous driving: One of tomorrow’s hottest market segments, if Zi Toprun successfully merges with a self-driving company, it could tap into a source of lucrative business opportunities. According to Allied Market Research, the global autonomous vehicle market could reach a valuation of $2.16 trillion by 2030, a CAGR of 40.1% from 2021 to the forecast year.
  • Microchip design and technology: Transport vehicles today cannot go anywhere without semiconductors. Although a slower growing segment, the value of microchips is that they are relevant right now. According to Reportlinker.com, the global automotive chip market could grow by almost $7 billion between 2021 and 2025, a CAGR of 4.53%.

Notably, Zi Toprun plans to focus its merger intentions with operations in North America, Europe and Asia (excluding China). The members of SPAC’s management team have experience in the automotive market, as well as in mergers and acquisitions.

What is Zi Toprun’s IPO date?

Amid a growing number of new listings after a tumultuous period earlier this year, Zi Toprun will put its name on the IPO calendar on May 18, 2022. The shares will trade on the Nasdaq exchange under the symbol ZTOPU.

The size of this IPO is of particular interest to market watchers. According to its prospectus, Zi Toprun intends to raise $110 million through the distribution of 11 million units at a price of $10. Each unit consists of one common share and one warrant, exercisable at $11.50. Under these terms, SPAC will achieve a market value of $143 million.

Zi Toprun casts a wide international network, although he will not pursue a business combination with a China-based company. Such a move could mitigate some of the geopolitical risks associated with Western markets’ relationship with China. However, it is a double edged sword as it is the second largest economy and the largest automotive sector. Notably, Zi targets companies with valuations between $200 million and $600 million.

Another interesting point is that Zi Toprun has requested to be confidentially released to the public on July 12, 2021. While this is speculation, the decision to launch now may reflect broader improvements in the business climate. investment bank EF Hutton Group is sole bookrunner for the IPO.

Before you pull the trigger on ZTOPU shares, you should be aware of the key distinctions between “regular” IPOs and SPAC-based listings. Perhaps the biggest consideration is the concept of redemption. Essentially, SPAC stakeholders before the merger announcement have a kind of “money back guarantee”, to use a phrase from a Reuters article. If shareholders don’t like the deal, they can reject it and so buy back their shares at the IPO price (usually $10).

According to a harvard business review report, “researchers found that among the SPACs in their study, the average repurchase rate per transaction was 58%, with a median repurchase rate of 73%. Moreover, in more than a third of SPACs, more than 90% of investors have withdrawn.

Therefore, it is essential to be sober with SPACs. More often than not, the proposed merger deal is not worth the time or money of savvy investors.

What Analysts Are Saying About Zi Toprun’s IPO

Due to his SPAC status, Wall Street analysts haven’t weighed in on Zi Toprun. Indeed, it is exceptionally difficult to provide a forecast based on the trajectory of ZTOPU stock until the underlying management team discloses its merger target. Unfortunately, SPACs represent shooting in the dark.

However, the focus on transportation disclosed in the S-1 document seems believable because that’s where much of the executives’ experience and insight is directed. Of the areas of focus, the autonomous driving element would be the most impactful.

Throughout the new normal, supply chain disruption has unfortunately been a recurring theme. At the root of this concept is the attrition rate among truckers – literally the hands and feet of global commerce. Never an easy job, the enormity of COVID-19 and its resulting devastation has placed gargantuan pressures on these workers, posing short- and long-term risks to the economy.

According to the Sam M. Walton College of Business at the University of Arkansas, drivers who experience inefficiency — or feelings of inefficiency — have been a major contributor to burnout. Theoretically, then, a machine learning-based protocol to automate transport would help keep the economy moving.

At the other end of the equation, while automated driving arguably has the greatest benefit, it is perhaps the most risky. According to researchers at the Massachusetts Institute of Technology, it could be another decade before automated transportation becomes a reality. Moreover, even that may not be a reasonable goal.

In the longer term, should machine-driven protocols fail, the contentious nightmare could be unprecedented. Therefore, Zi Toprun may choose to go for a more reasonable fusion target such as semiconductors. However, competitive concerns and a lack of distinction can impede progress down this supposedly safer path.

Financial History of Zi Toprun

As SPAC, Zi Toprun presents no financial history other than what it will raise when it goes public. This fund will be held in escrow until a merger agreement is finalized. If no merger takes place, shareholders will generally be reimbursed.

While you may be tempted to treat pre-merger SPACs as a risk-free investment, keep in mind that the payout rate typically occurs at the IPO price. Therefore, if you buy ZTOPU shares at a rate above $10, you will lose by redemption.

In the case of buying ZTOPU below $10, you need to consider the opportunity cost of profitable redemption of ZTOPU versus better possible uses of principal.

Potential of Zi Toprun

One factor that may help bolster support for Zi Toprun is renewed interest in IPOs. Although SPACs are always a tricky subject, the underlying purpose of the merger is relevant enough to potentially attract market players.

On the other hand, 2022 is turning out to be an incredibly difficult year. With rising global recession fears and escalating geopolitical tensions, risk aversion sentiment is high. Therefore, it is possible that ZTOPU stock will sit for months or even years.

Where to Buy Zi Toprun IPO Shares

If you want to participate in the Zi Toprun IPO, you need to know how to buy shares. But before taking this step, you need to register for a brokerage account. Below is a list of top brokers to consider.

ZTOPU restrictions for retail investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Do not engage if you have inside information.

ZTOPU pre-IPO

Although no pre-IPO access is available for ZTOPU, ClickIPO.com offers retail investors many “early bird specials”.


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