Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

v3.21.2
Fair Value Measurement
9 Months Ended
Sep. 30, 2021
Fair Value Measurement  
Fair Value Measurement

11.       Fair Value Measurement

The Company complies with FASB ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.  ASC 820 determines fair value to be the price that would be received to sell an asset or world be paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability:

Significant

Significant

Other

Other

Quoted Prices in

Observable

Unobservable

September 30, 

Active Markets

Inputs

Inputs

Description

    

2021

    

(Level 1)

    

(Level 2)

    

(Level 3)

Assets:

 

  

 

  

 

  

 

  

Cash and cash equivalent held in Trust Account

 

345,012,561

 

345,012,561

 

 

Liabilities:

 

  

 

  

 

  

 

  

Derivative liability - public warrants

 

6,831,000

 

6,831,000

 

 

Derivative liability - private warrants

 

5,933,333

 

 

5,933,333

 

Convertible promissory note - related party

779,648

779,648

Warrants 

The warrants issued in connection with the Company’s initial public offering on February 23, 2021 are subject to treatment as a derivative liability. When Level 1 inputs are not available, the Company utilizes a Monte Carlo simulation methodology to value the warrants at each reporting period with changes recognized in the statements of operations. The estimated fair value of the warrant liability is determined using Level 1 and Level 2 inputs. The key assumptions in the option pricing model utilized are assumptions related to expected share-price volatility, risk-free interest rate, dividend yield, and expected term. The expected volatility at each reporting period was selected based on the average volatility of SPACs that are searching for an acquisition target. SPAC volatility is based upon historical stock prices over a six-year lookback period, or all historical data if less than six years is available. The risk-free interest rate is based on interpolation of U.S. Treasury yields with a term commensurate with the term of the warrants. The Company anticipates the dividend yield to be zero. The expected term of the warrants is assumed to be one year until the close of a Business Combination, and the contractual five-year term subsequently.

The key inputs into the option model for the Private Placement Warrants and Public Warrants as of February 23, 2021 and September 30, 2021 were as follows:

As of

 

    

February 23, 2021

    

September 30, 2021

 

Implied volatility

 

20

%

15.00

%

Risk-free interest rate

 

0.8

%

1.11

%

Warrant exercise price

$

11.50

$

11.50

Expected term

 

6

 

5.75

The Warrants are measured at fair value on a recurring basis.

As of February 23, 2021, the values of the Public Warrants and Private Warrants were $11.2 million and $9.7 million, respectively.

As of September 30, 2021, the values of the Public Warrants and Private Warrants were $6.8 million and $5.9 million, respectively.

The following table presents the changes in the fair value of Level 3 warrant liabilities:

    

    

Private 

    

Total warrant 

Public warrants

warrants

liabilities

Fair value as of January 1, 2021

$

$

$

Fair value when issued February 23, 2021

11,247,000

9,671,333

20,918,333

Change in fair value from inception

(1,035,000)

(890,000)

(1,925,000)

Transfer to Level 2

(10,212,000)

(8,781,333)

(18,993,333)

Fair value at September 30, 2021

$

$

$

The initial fair value measurement of the private warrants reflects an increase of $771,333 from the issuance proceeds of $8,900,000, as the initial fair value was in excess of the proceeds received and is included in the statements of operations in the line other expense – private warrant liability.

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. As of February 23, 2021, the Public and Private Warrants were classified as Level 2 due to the use of both observable inputs in an active market as well as quoted prices in active markets for similar assets and liabilities. As of June 30, 2021, the Public Warrants were classified as Level 1 due to the use of quoted prices in active markets, and the Private Warrants were classified as Level 2.

The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 2 fair value measurement during the three months ended March 31, 2021 was $10,212,000, The Public Warrants were subsequently transferred to Level 1. The estimated fair value of the Private Placement Warrants transferred from a Level 3 measurement to a Level 2 fair value measurement during the three months ended March 31, 2021 was $8,781,333. There were no changes between levels during the three months ended June 30, 2021 and September 30, 2021.

Convertible Promissory Note – Related Party

The Company utilizes a binomial lattice model to estimate fair value of the convertible promissory note at each reporting period with changes recognized in the statements of operations.  The key assumptions in the model relate to expected share-price volatility, risk-free interest rate, exercise price, expected term and the probability of occurrence of the transaction. The expected volatility was based on the average volatility of SPACs that are searching for an acquisition target. SPAC volatility is based upon historical stock prices over a six-year lookback period, or all historical data if less than six years is available. The risk-free interest rate is based on interpolation of U.S. Treasury yields with a term commensurate with the term of the warrants. The Company anticipates the dividend yield to be zero. The expected term of the warrants is assumed to be the estimated date of a Business Combination.

The estimated fair value of the convertible promissory note was based on the following significant inputs:

    

September 30, 2021

 

Risk-free interest rate

$

0.07

%

Term

 

0.75

Expected volatility

 

15.00

%

Exercise price

$

1.50

Stock Price

$

9.75

Probability of transaction

 

75.0

%

The following table presents the changes in the fair value of the Level 3 convertible promissory note:

    

Convertible

Promissory

Note

Fair value as of January 1, 2021

$

Proceeds received through convertible promissory note

 

750,000

Change in valuation inputs or other assumptions

 

29,648

Fair value as of September 30, 2021

$

779,648

There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during the three and nine months ended September 30, 2021 for the convertible promissory note.