Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Note

9-Fair

Value Measurements

The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021, by level within the fair value hierarchy:


	Fair Value Measured as of September 30, 2022

	Level 1		Level 2		Level 3		Total
Assets
Investments held in Trust Account (1)	$	553,175,215	$	—	$	—	$	553,175,215
Liabilities:
Derivative public warrant liabilities	$	440,000	$	—	$	—	$	440,000
Derivative private warrant liabilities	$	—	$	480,000	$	—	$	480,000

(1)	Includes approximately $1,400 of cash.


	Fair Value Measured as of December 31, 2021

	Level 1		Level 2		Level 3		Total
Assets
Investments held in Trust Account (2)	$	550,153,304	$	—	$	—	$	550,153,304
Liabilities:
Derivative public warrant liabilities	$	8,250,000	$	—	$	—	$	8,250,000
Derivative private warrant liabilities	$	—	$	—	$	9,120,000	$	9,120,000

(2)	Includes approximately $900 of cash.

Transfers to/from Levels 1, 2 and 3 are recognized at the beginning of the reporting period. In May 2021, the Public Warrants began to be separately listed and traded. As a result, the fair value of the Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement. The Private Warrants transferred to a Level 2 measurement in as of January 1, 2022 as the Company determined the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants.

Level 1 assets include investments in U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.

The fair value of the Public Warrants issued in connection with the Initial Public Offering and Private Placement Warrants were initially and subsequently measured at fair value using a modified Black-Scholes Option Pricing Method. Starting July 1, 2021, the fair value of Public Warrants issued in connection with the Initial Public Offering transferred to a Level 1 measurement and was measured based on the listed market price of such warrants. The fair value of the Private Placement Warrants was measured utilizing a modified Black-Scholes Model through December 31, 2021. As the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. As such, since January 1, 2022, the Company refers to the listed market price of the Public Warrants to determine the fair value of the Private Placement warrants.

For the three months ended September 30, 2022 and 2021, the Company recognized income of approximately $4.6 million and $11.6 million, respectively, resulting from a decrease in the fair value of the derivative warrant liabilities, presented as change in fair value of derivative warrant liabilities on the accompanying unaudited condensed statements of operations.

For the nine months ended September 30, 2022 and for the period from January 11, 2021 (inception) through September 30, 2021, the Company recognized income of approximately $16.5 million and $20.8 million, respectively, resulting from a decrease in the fair value of liabilities, presented as change in fair value of derivative warrant liabilities on the accompanying unaudited condensed statements of operations.

The estimated fair value of the Private Placement Warrants, and the Public Warrants prior to being separately listed and traded, was determined using Level 3 inputs. Inherent in a modified Black-Scholes Option Pricing Method are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury

zero-coupon

yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:


	As of December 31, 2021
Exercise price		11.50
Stock Price		9.74
Option term (in years)		5.00
Volatility		13	%
Risk-free interest rate		1.26	%

The change in the fair value of the derivative warrant liabilities measured utilizing Level 3 inputs for the nine months ended September 30, 2022 and the change in the fair value of the derivative warrant liabilities measured utilizing Level 3 for the period from January 11, 2021 (inception) through September 30, 2021 is summarized as follows:


Derivative warrant liabilities at December 31, 2021 - Level 3	$	9,120,000
Transfer of Private Warrants to Level 2 - March 31, 2022		(9,120,000	)

Derivative warrant liabilities at September 30, 2022 - Level 3	$	—


Derivative warrant liabilities at January 11, 2021	$	—
Issuance of Derivative Warrants (level 3)		56,230,000
Change in fair value of derivative warrant liabilities - Level 3		(3,030,000	)

Derivative warrant liabilities at March 31, 2021 - Level 3	$	53,200,000
Transfer of Public Warrants to Level 1		(23,320,000	)
Change in fair value of derivative warrant liabilities - Level 3		(12,240,000	)

Derivative warrant liabilities at June 30, 2021 - Level 3	$	17,640,000
Change in fair value of derivative warrant liabilities - Level 3		(6,360,000	)

Derivative warrant liabilities at September 30, 2021 - Level 3	$	11,280,000

- Definition

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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