Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Financial assets and liabilities that are measured at fair value on a recurring basis are classified as Level 1, Level 2 and Level 3 as follows (in thousands):

	As of March 31, 2024
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury debt securities	$	18,012	$	18,012	$	—	$	—
Safeguarding asset for crypto	1,233,238		—		1,233,238		—
Total Assets	$	1,251,250	$	18,012	$	1,233,238	$	—
Liabilities:
Safeguarding obligation for crypto	$	1,233,238	$	—	$	1,233,238	$	—
Warrant liability—Class 1 and Class 2 warrants	20,078		—		—		20,078
Warrant liability—public warrants	928		928		—		—
Total Liabilities	$	1,254,244	$	928	$	1,233,238	$	20,078

	As of December 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury debt securities	$	17,398	$	17,398	$	—	$	—
Safeguarding asset for crypto	701,556		—		701,556		—
Total Assets	$	718,954	$	17,398	$	701,556	$	—
Liabilities:
Safeguarding obligation for crypto	$	701,556	$	—	$	701,556	$	—
Warrant liability—public warrants	2,356		2,356		—		—
Total Liabilities	$	703,912	$	2,356	$	701,556	$	—

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, unbilled accounts receivable, due from related party, deposits with clearinghouse, due to related party, accounts payable and accrued liabilities, and operating lease obligations approximate their fair values due to their short-term nature. The balance of deposits with clearinghouse not invested in U.S. government securities are in the form of cash, and therefore approximate fair value.

Our investments in debt securities consist of U.S. Treasury debt securities held in the custody of a major financial institution. As of March 31, 2024, our investment in available-for-sale debt securities was determined to be a Level 1 investment based on quoted prices in active markets and was recorded in the consolidated balance sheets at fair value.

The fair value of the safeguarding obligation for crypto and the corresponding safeguarding asset for crypto was determined using Level 2 inputs which included using the value of the safeguarded asset determined as the mid-point of a bid-ask spread in the market we determined to be the principal market for the related crypto as of March 31, 2024.

The contingent consideration associated with the acquisition of Bakkt Crypto Solutions is valued using Level 3 inputs, which includes a Monte Carlo model. The inputs for the Monte Carlo model included forecasted financial performance of Bakkt Crypto Solutions and estimated earnings volatility. The contingent consideration liability is revalued each reporting period and any change in the liability is reflected in the Company's statements of operations in “Acquisition-related expenses". As of the acquisition date, the fair value of the contingent consideration was estimated to be $2.9 million

and used an estimated gross profit volatility of 66%. As of December 31, 2023, we determined the value of the contingent consideration was zero, based on our forward-looking projections and minimum profit requirements associated with the contingent consideration and reversed the accrual through acquisition expenses. As of March 31, 2024, we determined the value of the contingent consideration remained zero.

Our public warrant liability is valued based on quoted prices in active markets and is classified within Level 1. The warrants associated with the Concurrent Offerings were valued using a monte-carlo model, which is considered a Level 3 input. A significant input to the monte-carlo model include the volatility of movement in the price of the stock underlying the warrants, which was estimated using the historical volatility of our Class A common stock over the contractual period of the warrant.

As described in Note 5 our owned crypto is continually evaluated for impairment using the lowest quoted price in the market we determine to be the principal market for the related crypto, which we determined was a Level 2 input. Other fair value inputs associated with non-recurring impairment analyses are discussed in the notes of the related assets.