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COMMON STOCK WARRANT LIABILITY
 9 Months Ended
Sep. 30, 2021
Equity [Abstract]  
COMMON STOCK WARRANT LIABILITY COMMON STOCK WARRANT LIABILITY
On July 23, 2021, in connection with the reverse recapitalization treatment of the Merger, the Company effectively issued 44,350,000 private warrants to purchase shares of Lucid’s common stock. The private warrants were initially recognized as a liability with a fair value of $812.0 million. The private warrants remained unexercised and were remeasured to fair value as of September 30, 2021, resulting in a loss of $24.8 million for the three and nine months ended September 30, 2021, classified within change in fair value of common stock warrant liability in the condensed consolidated statements of operations.
The 44,350,000 private warrants include the 14,783,333 Sponsor Earnback Warrants subject to the contingent forfeiture provisions. The first earnback triggering event was satisfied on September 29, 2021. As a result, the first tranche of the Sponsor Earnback Warrants, or 4,927,778 private warrants, were vested and no longer subject to the transfer restrictions and contingent forfeiture provisions. See Note 11 - Earnback Shares and Warrants for more information.
The fair value of the private warrants that are not subject to the contingent forfeiture provisions was estimated using a Black-Scholes option pricing model that takes into account the contract terms as well as the quoted price of the Company’s common stock in an active market. The volatility is based on the actual market activity of the Company’s peer group as well as the Company's historical volatility. The expected life is based on the remaining contractual term of the warrants, and the risk free interest rate is based on the implied yield available on U.S. Treasury securities with a maturity equivalent to the warrants’ expected life. The level 3 fair value inputs used in the valuation were as follows:
September 30, 2021July 23, 2021
Fair value of private warrants per share$18.92  $18.44  
Volatility75.00 %80.00 %
Expected term (in years)4.85.0
Risk-free rate0.94 %0.72 %
Dividend yield— %— %
The fair value of the private warrants that are subject to the contingent forfeiture provisions was estimated using a Monte-Carlo simulation, which involved random iterations of future stock-price paths over the contractual life of the private warrants, including the probability distribution of outcomes, the payoff to the holder was determined based on the achievement of the volume-weighted average trading sale price (the “VWAP”) thresholds within each simulation. The present value of the payoff in each simulation is calculated, and the fair value of the liability is determined by taking the average of all present values. The level 3 fair value inputs used in the valuation were as follows:
September 30, 2021July 23, 2021
Fair value of Tranche 1 with $20.00 VWAP threshold per share
$—  $18.16  
Fair value of Tranche 2 with $25.00 VWAP threshold per share
$18.78  $18.07  
Fair value of Tranche 3 with $30.00 VWAP threshold per share
$18.60  $17.92  
Volatility75.00 %80.00 %
Expected term (in years)4.85.0
Risk-free rate0.94 %0.72 %
Dividend yield— %— %