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Recurring Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Recurring Fair Value Measurements

Recurring Fair Value Measurements

Note 6 — Recurring Fair Value Measurements

As of June 30, 2022 and December 31, 2021, the Company’s warrant liability was valued at $2,494,354 and $14,508,554, its FPA liability was valued at $427,083 and $2,462,675, and its Working Capital Loan Option was valued at $0 and $0, respectively.

Under the guidance in ASC 815-40 the warrants, FPA and Working Capital Loan Option do not meet the criteria for equity classification. As such, these financial instruments must be recorded on the balance sheet at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, these financial instruments valuations will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.

The Company’s fair value for the working capital loan option is based on a valuation model utilizing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. The Company determined the FPA units are

equivalent to the value of the Private Placement Warrant coverage; therefore, the Private Placement Warrants fair value was used to determine the fair value of the FPA units. The Company’s Private Placement Warrants contain a make-whole provision in the contractual terms of the warrant agreement. As such, the Company determined the Private Placement Warrants were economically equivalent to the public warrants. As of June 30, 2022, the closing price of the public warrants was used to determine the fair value of the Private Placement Warrants and the FPA liability. At June 30, 2022, the Private Placement Warrants and the FPA liability were re-classified as a Level 2 within the fair value hierarchy.

On March 15, 2021, the Company’s public warrants began trading on the Nasdaq Stock Market LLC. The Company’s warrant liability as of June 30, 2022 and December 31, 2021 for the public warrants is based on unadjusted quoted prices in an active market (the NASDAQ Stock Market LLC) for identical assets or liabilities that the Company has the ability to access. The fair value of the public warrant liability is classified within Level 1 of the fair value hierarchy.

Substantially all of the Company’s trust assets on the balance sheet consist of U. S. Money Market funds which are classified as cash equivalents. Fair values of these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets.

The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.


June 30, 2022		Level 1			Level 2			Level 3
Assets:
U.S. Money Market held in Trust Account		$	380,194,051		$	—		$	—

Liabilities:
Forward Purchase Agreement Liability		$	—		$	427,083		$	—
Working Capital Loan Option			—			—			—
Public Warrants			1,581,250			—			—
Private Placement Warrants			—			913,104			—
		$	1,581,250		$	1,340,187		$	—


December 31, 2021		Level 1			Level 2			Level 3
Assets:
U.S. Money Market held in Trust Account		$	379,588,190		$	—		$	—

Liabilities:
Forward Purchase Agreement Liability		$	—		$	—		$	2,462,675
Working Capital Loan Option			—			—			—
Public Warrants			9,243,355			—			—
Private Placement Warrants			—			—			5,265,199
		$	9,243,355		$	—		$	7,727,874

The Company utilized a Rubinstein-Gesk model for the Working Capital Loan Option at each reporting period, with changes in fair value recognized in the statement of operations.

The Company determined the FPA units are equivalent to the value of the Private Placement Warrant coverage; therefore, the Private Placement Warrants fair value was used to determine the fair value of the FPA units as of June 30, 2022 and December 31, 2021.

The aforementioned warrant liabilities and Working Capital Loan Option are not subject to qualified hedge accounting.

The following table provides quantitative information regarding Level 3 fair value measurements:


		At
		December 31,
		2021
Share price		$	9.84
Strike price		$	11.50
Term (in years)			5.97
Volatility			13.6	%
Risk-free rate			1.35	%
Dividend yield			0.0	%

The following table provides quantitative information regarding Level 3 fair value measurements as of June 30, 2022 and December 31, 2021 (the initial measurement date of the Working Capital Loan Option):


		At			At
		June 30,			December 31,
		2022			2021
Stock price		$	9.84		$	9.84
Volatility			11.2	%		13.6	%
Weighted term			0.49	years		0.99	years
Conversion price		$	1.50		$	1.50
Risk-free rate			3.02	%		1.35	%

The following table provides a reconciliation of changes in fair value liabilities of the beginning and ending balances for the Company’s Warrants, FPA and Working Capital Loan Option classified as Level 3:


Fair Value at December 31, 2021		$	7,727,874
Change in fair value			(4,446,542)
Fair Value at March 31, 2022		$	3,281,332
Change in fair value			(1,941,145)
Private Placement Warrants reclassified to level 2 (1)			(913,104)
FPA reclassified to level 2 (1)			(427,083)
Fair Value at June 30, 2022		$	—

Fair Value at December 31, 2020		$	—
Initial fair value of the warrants and FPA			28,233,716
Public Warrants reclassified to level 1 (2)			(7,590,000)
Change in fair value			(16,068,517)
Fair Value at March 31, 2021		$	4,575,199
Change in fair value			6,423,514
Fair Value at June 30, 2021		$	10,998,713

(1)	Assumes the Private Placement Warrants and FPA were reclassified on June 30, 2022.

(2)	Assumes the Public Warrants were reclassified on June 30, 2021.

There were no other transfers between Levels 1, 2 or 3 during the three and six months ended June 30, 2022 or June 30, 2021.

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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