FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2023

FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the “exit price” that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between independent market participants on the measurement date. The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy, which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This hierarchy prioritizes the inputs into three broad levels as follows:

•Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3—Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. Factors used to develop the estimated fair value are unobservable inputs that are not supported by market activity. The sensitivity of the fair value measurement to changes in unobservable inputs may result in a significantly higher or lower measurement.

Cash, cash equivalents and investments are reported at their respective fair values on the Company’s condensed consolidated balance sheets. The Company’s short-term and long-term investments are classified as available-for-sale securities.

The following table sets forth the Company’s financial assets subject to fair value measurements on a recurring basis by level within the fair value hierarchy as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023
									Reported As:
	Amortized cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash and cash equivalents		Short-Term Investments		Long-Term Investments
Cash	$	522,195	$	—	$	—	$	522,195	$	522,195	$	—	$	—
Level 1:
Money market funds	557,476		—		—		557,476		557,476		—		—
U.S. Treasury securities	2,522,890		59		(6,232)		2,516,717		59,767		2,205,811		251,139
Subtotal	3,080,366		59		(6,232)		3,074,193		617,243		2,205,811		251,139
Level 2:
U.S. government agency securities	45,005		—		(26)		44,979		—		44,979		—
Certificates of deposit	144,180		49		(107)		144,122		—		144,122		—
Commercial paper	447,969		14		(210)		447,773		24,953		422,820		—
Corporate debt securities	671,591		274		(2,803)		669,062		—		440,474		228,588
Subtotal	1,308,745		337		(3,146)		1,305,936		24,953		1,052,395		228,588
Total	$	4,911,306	$	396	$	(9,378)	$	4,902,324	$	1,164,391	$	3,258,206	$	479,727


	December 31, 2022
									Reported As:
	Amortized cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash and cash equivalents		Short-Term Investments		Long-Term Investments
Cash	$	321,667	$	—	$	—	$	321,667	$	321,667	$	—	$	—
Level 1:
Money market funds	1,377,540		—		—		1,377,540		1,377,540		—		—
U.S. Treasury securities	1,861,449		151		(9,431)		1,852,169		—		1,570,591		281,578
Subtotal	3,238,989		151		(9,431)		3,229,709		1,377,540		1,570,591		281,578
Level 2:
U.S. government agency securities	43,477		46		(18)		43,505		—		43,505		—
Certificates of deposit	174,037		67		(132)		173,972		—		173,972		—
Commercial paper	238,224		63		(122)		238,165		19,761		218,404		—
Corporate debt securities	438,148		208		(2,404)		435,952		16,797		170,759		248,396
Subtotal	893,886		384		(2,676)		891,594		36,558		606,640		248,396
Total	$	4,454,542	$	535	$	(12,107)	$	4,442,970	$	1,735,765	$	2,177,231	$	529,974

During the three and nine months ended September 30, 2023 and 2022, there were immaterial realized gains or losses on the sale of available-for-sale securities. Accrued interest receivable excluded from both the fair value and amortized cost basis of the available-for-sale securities was $10.5 million and $7.5 million as of September 30, 2023 and December 31, 2022, respectively, and was recorded in other current assets in the condensed consolidated balance sheets. As of September 30, 2023 and December 31, 2022, no allowance for credit losses was recorded related to an impairment of available-for-sale securities.

The following table summarizes our available-for-sale securities by contractual maturity:


	September 30, 2023
	Amortized cost		Estimated Fair Value
Within one year	$	3,264,410	$	3,258,206
After one year through three years	482,509		479,727
Total	$	3,746,919	$	3,737,933

Level 3 liabilities consist of common stock warrant liability of which the fair value was measured upon issuance and is remeasured at each reporting date. Level 3 liabilities also consist of residual value guarantee liabilities, of which the fair value measurement is nonrecurring and measured upon delivery of vehicles. The valuation methodology and underlying assumptions are discussed further in Note 2 “Summary of Significant Accounting Policies” and Note 7 “Common Stock Warrant Liability”. Significant increases (decreases) in the unobservable inputs used in determining the fair value would result in a significantly higher (lower) fair value measurement. The following table presents a reconciliation of the common stock warrant liability measured and recorded at fair value on a recurring basis (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Fair value-beginning of period	$	139,259	$	536,635	$	140,590	$	1,394,808
Change in fair value	(60,316)		(140,146)		(61,647)		(998,319)
Fair value-end of period	$	78,943	$	396,489	$	78,943	$	396,489

- 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.

+ References + Details