Convertible Notes and Derivative Instrument

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Convertible Notes and Derivative Instrument

Convertible Notes and Derivative Instrument

From February 23, 2018 to May 16, 2018, the Company issued convertible notes in an aggregate principal amount of $502 million (total proceeds of $507 million, which included a total net funding premium at issuance), the majority of which were purchased by existing unitholders of the Company’s preferred units, with a maturity equal to the earlier of (a) the fourth anniversary from the first issuance date, (b) the consummation of a liquidity event, or (c) upon an event of default, as defined in the LLC Agreement. In connection with the Company’s IPO in March 2021, the principal balance and the accrued interest on the convertible notes were automatically converted into 171,750,446 shares of the Company’s Class A common stock.

The convertible notes had an annual effective interest rate of 16.99%. The Company did not incur interest expense on the convertible notes for the three months ended June 30, 2021. The Company recorded interest expense from its convertible notes for the three months ended June 30, 2020 of $22 million, consisting of $14 million of contractual interest expense and $8 million of debt discount amortization. The Company recorded interest expense from its convertible notes for the six months ended June 30, 2021 and 2020 of $20 million and $43 million, respectively, consisting of $15 million and $27 million of contractual interest expense and $5 million and $16 million of debt discount amortization, respectively.

The convertible notes contained embedded derivatives that allowed or required the holders of the convertible notes to convert them into a variable number of the Company’s equity securities for a value equal to a significant premium over the then principal and accrued interest balance. These embedded derivatives were bifurcated and accounted for separately as a single, compound derivative instrument. The convertible notes did not convert to common shares based on this embedded feature, rather they converted based on a price calculated by dividing $6.3 billion with the number of common equity securities, on an as-converted and as-exercised basis, outstanding on the closing of the IPO. Following the convertible notes conversion to shares of Class A common stock, the embedded derivatives no longer exist. There was no change in fair value of the derivative instrument during the six months ended June 30, 2021. The change in fair value of the derivative instrument resulted in a gain of $17.8 million and a loss of $(0.1) million for the three and six months ended June 30, 2020, respectively, which was recognized in the condensed consolidated statements of operations and comprehensive loss within “Other income (expense), net.”