Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.21.2
Fair Value Measurements
 9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Note 10—Fair Value Measurements
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 that the Company utilized to determine such fair value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Description
   
Quoted Prices in
Active Markets
(Level 1)
     
Significant
Other
Observable
Inputs
(Level 2)
     
Significant
Other
Unobservable
Inputs
(Level 3)
  
Assets:
                           
U.S. Treasury Securities
    $ 977,556,354      $ —        $ —    
Liabilities:
                           
Derivative warrant liabilities – public warrants
    $ 18,328,130      $ —        $ —    
Derivative warrant liabilities – private warrants
    $ —        $ —        $ 13,795,000  
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement in May 2021, when the Public Warrants were separately listed and traded.
Level 1 assets include investments in money market funds and U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields and quoted market prices from dealers or brokers.
The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model at each measurement date. The fair value of Public Warrants have subsequently been measured based on the listed market price of such warrants. For the three and nine months ended September 30, 2021, the Company recognized a charge to the condensed consolidated statement of operations resulting from an increase in the fair value of liabilities of approximately $6.8 million and $3.0 million, respectively, presented as change in fair value of derivative warrant liabilities on the accompanying condensed consolidated statement of operations.
The estimated fair value of the Private Placement Warrants, and the Public Warrants prior to being separately listed and traded, was determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury
zero-coupon
yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
 
 
 
 
 
 
 
 
 
 
    
As of
September 30,
2021
    
As of
March 18,
2021
  
Stock price
    $ 9.93     $ 9.80  
Volatility
      19.4 %      23.0 % 
Expected life of the options to convert
      5.96       6.51  
Risk-free rate
      1.14 %      1.17 % 
Dividend yield
      —         —    
The change in the fair value of the Level 3 derivative warrant liabilities for nine months ended September 30, 2021 is summarized as
follows
:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    
Public
Warrants
     
Private
Warrants
     
Total
  
Derivative warrant liabilities at December 31, 2020
    $ —        $ —        $ —    
Issuance of derivative warrant liabilities
      19,769,110        15,391,590        35,160,700  
Transfer to Level 1
      (22,008,700 )       —          (22,008,700 ) 
Change in fair value of derivative warrant liabilities
      2,239,590        (1,596,590 )       643,000  
    
 
 
     
 
 
     
 
 
  
Derivative warrant liabilities at September 30, 202
1
    $ —        $ 13,795,000      $ 13,795,000