Fair Value Measurements

12 Months Ended

Dec. 31, 2021

Fair value measurements

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):


	Fair Value Measured as of December 31, 2021 Using:
	Level 1		Level 2		Level 3		Total
Assets included in:
Money market funds included in cash and cash equivalents	$	1,191,079	$	—	$	—	$	1,191,079
Total fair value	$	1,191,079	$	—	$	—	$	1,191,079
Liabilities included in:
Derivative liabilities – public and private warrants	$	—	$	—	$	—	$	—
Total fair value	$	—	$	—	$	—	$	—


	Fair Value Measured as of December 31, 2020 Using:
	Level 1		Level 2		Level 3		Total
Assets included in:
Money market funds included in cash and cash equivalents	$	987,728	$	—	$	—	$	987,728
Total fair value	$	987,728	$	—	$	—	$	987,728
Liabilities included in:
Derivative liabilities – public and private warrants	$	90,487	$	—	$	47,615	$	138,102
Total fair value	$	90,487	$	—	$	47,615	$	138,102

The fair value of the Company’s money market funds is determined using quoted market prices in active markets for identical assets.

The carrying amounts included in the Consolidated Balance Sheets under Current assets approximate fair value because of the short maturity of these instruments.

We carry the convertible senior notes at face value less the unamortized debt issuance costs on our consolidated balance sheets and present that fair value for disclosure purposes only. As of December 31, 2021, the fair value of the 2026 Notes was $700.9 million. The estimated fair value of the convertible notes, which are classified as Level 2 financial instruments, was determined based on the estimated or actual bid prices of the convertible senior notes in an over-the-counter market on the last business day of the period.

Upon closing the Business Combination, the Company recognized a $62.7 million liability for its private and public warrants and a corresponding non-cash reduction of additional paid-in capital for the same amount. The Company’s derivative liability for its private and public warrants are measured at fair value on a recurring basis. The private warrants fair value is determined based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the private warrants uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assess these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. The Company uses an option pricing simulation to estimate the fair value of its private warrants, all of which were exercised in March 2021. The public warrants fair value is determined using its publicly traded prices (Level 1). During 2021, the Company completed its redemption of all outstanding public warrants (refer to Note 8). Changes in the fair value of the derivative liability related to updated assumptions and estimates are recognized within the Condensed Consolidated Statements of Operations as a non-operating expense. For the year ended December 31, 2021, the changes in the fair value of the derivative liability resulted from changes in the fair values of the underlying Class A common shares and its associated volatility upon exercise in March and April 2021. The change in fair value of derivatives amounted to a non-cash loss of $138.4 million attributed to public and private warrants during the year ended December 31, 2021, compared to a hou$75.4 million non-cash loss attributed to public and private warrants during the year ended December 31, 2020.

The significant assumptions in the option pricing simulation of a Black Scholes valuation model which the Company used to determine the fair value of the private warrants are:


	December 31, 2020			October 29 2020
Stock price	$	14.65		$	8.96
Exercise price	$	11.50		$	11.50
Expected warrant term	4.8			5.0
Volatility	32.00		%	40.75		%
Risk-free interest rate	0.36		%	0.38		%
Dividend yield	0.00		%	0.00		%
Monte Carlo simulation number of iterations	100,000			100,000
Negotiated discount (1)	7.00		%	7.00		%

(1)"Negotiated discount" is an estimated marketability discount assuming a market participant would negotiate a discount by referring to the quoted price for a public warrant.

The reconciliation of changes in Level 3 measurements of the private warrants is as follows:


Balance as of December 31, 2020	$	47,615
Change in fair value	63,526
Cashless exercise of warrants	(111,141)
Balance as of December 31, 2021	$	—

The following table presents changes in Level 3 liabilities measured at fair value for the year ended December 31, 2020 (in thousands):


	Private warrants derivative liability		Convertible Equity Security		Embedded derivative in bridge notes		Total

Balance, December 31, 2019	$	—	$	—	$	1,325	$	1,325
Merger recapitalization	21,715		—		—		21,715
Issuance of bridge notes	—		—		1,934		1,934
Issuance of convertible equity security	—		50,000		—		50,000
Change in fair value	25,900		9,647		406		35,953
Settlement of bridge notes and convertible equity security	—		(59,647)		(3,665)		(63,312)
Balance, December 31, 2020	$	47,615	$	—	$	—	$	47,615

Upon consummation of the Business Combination, the Company's convertible equity security and bridge notes settled in exchange for 5,882,352 and 1,361,268 shares of Class A common stock, respectively. Prior to the consummation of the Business Combination, the Company measured the embedded derivative liability and the convertible equity security at fair value based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the embedded derivative and the convertible equity security use assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assessed these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. The changes in the fair value of the convertible equity security and the embedded derivative liability resulted from changes in price of Spartan’s common stock and an adjustment to the probabilities of completion of a SPAC transaction. Changes in the fair value of the embedded derivative and convertible equity security related to updated assumptions and estimates resulted in a loss of $10.1 million for the year ended December 31, 2020 recognized within the Consolidated Statements of Operations. No changes in valuation techniques or inputs occurred during the year ended December 31, 2021.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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