Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2023

The carrying values and estimated fair values of the Company’s debt financial instruments were as follows (in thousands):


	September 30, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
Convertible Notes	$	415,158	$	485,563	$	413,752	$	430,236

The fair value of the Convertible Notes is estimated using Level 2 inputs, as they are not registered securities nor listed on any securities exchange but may be traded by qualified institutional buyers.

The following table summarizes the activity related to the Capped Calls (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Beginning balance	$	64,014	$	—	$	—	$	—
Change in fair value gain and loss	116		—		(1,140)		—
Change due to correction of errors (see Note 1)	—		—		65,270		—
Ending balance	$	64,130	$	—	$	64,130	$	—

The Capped Calls are valued using a Black-Scholes model, with the most judgmental unobservable input being the volatility measure. The value of the Capped Call is determined using unobservable inputs and is considered to be a Level 3 value in the fair value hierarchy.

The fair value of the Term Loans and Other Debt is estimated using Level 2 inputs. The carrying values of the Term Loans outstanding under the Senior Secured Credit facility recorded in the condensed consolidated balance sheets approximate fair value due to the variable nature of the interest rates.

Other Debt totaling $55.3 million, consists of $40.0 million variable rate obligations and $15.3 million fixed rate obligations. Of the $15.3 million fixed rate obligations, $3.3 million mature in 2023 and $11.9 million mature in 2024. Due to the relative short-term maturity of the fixed rate obligations, the Company believes current carrying value approximates fair value. The carrying value of the $40.0 million variable rate obligations approximate fair value due to the variable nature of the interest rates.