Convertible Notes and Derivative Instrument

12 Months Ended

Dec. 31, 2021

Convertible Notes and Derivative Instrument

Details of the carrying amount of convertible notes were as follows:


(in thousands)	December 31, 2021		December 31, 2020
Principal	$	—	$	501,500
Add: Accrued and unpaid interest	—		119,378
Less: Unamortized discount	—		(31,027)
Total	$	—	$	589,851

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 recorded interest expense from its convertible notes for the years ended December 31, 2021, 2020, and 2019 of $20 million, $91 million, and $76 million respectively, consisting of $15 million, $59 million, and $38 million of contractual interest expense and $5 million, $32 million, and $38 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 year ended December 31, 2021. The change in fair value of the derivative instrument resulted in a gain of $150 million and a loss of $(37) million for the years ended December 31, 2020 and 2019, respectively, which was recognized in the consolidated statements of operations and comprehensive loss within “Other (expense) income, net.”