FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2023

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

5. FAIR VALUE MEASUREMENTS

Items Measured at Fair Value on a Recurring Basis

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	366,282	$	—	$	—	$	366,282
Investments:
U.S. treasury bills (due within 1 year)		—		9,910		—		9,910
U.S. agency securities (due within 1 year)		—		207,491		—		207,491
Commercial paper (due within 1 year)		—		728,186		—		728,186
Corporate notes (due within 1 year)		—		11,997		—		11,997
Total financial assets	$	366,282	$	957,584	$	—	$	1,323,866
Liabilities
Contingent earn-out liability	$	—	$	—	$	5,231	$	5,231
Warrant liabilities		1,904		1,501		—		3,405
Total financial liabilities	$	1,904	$	1,501	$	5,231	$	8,636

	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	200,677	$	—	$	—	$	200,677
Commercial paper (due within 90 days)		—		291,311		—		291,311
Investments:
U.S. treasury bills (due within 1 year)		—		63,807		—		63,807
U.S. agency securities (due within 1 year)		—		14,744		—		14,744
Commercial paper (due within 1 year)		—		814,732		—		814,732
Corporate notes (due within 1 year)		—		11,867		—		11,867
Total financial assets	$	200,677	$	1,196,461	$	—	$	1,397,138
Liabilities
Contingent earn-out liability	$	—	$	—	$	7,160	$	7,160
Warrant liabilities		2,961		2,332		—		5,293
Total financial liabilities	$	2,961	$	2,332	$	7,160	$	12,453

In determining the fair value of its cash equivalents at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data. There were no changes in valuation techniques or transfers between fair value measurement levels for the periods presented. 

The fair value of the Public Warrants was based on observable listed prices for such warrants. The fair value of the Private Warrants is equivalent to that of the Public Warrants as they have substantially the same terms; however, they are not actively traded.

The carrying amounts of the Company’s prepaid and other current assets, accounts payable and accrued liabilities, approximate fair value due to their short maturities.

Level 3 Financial Instruments

The Earn-Out Shares accounted for under ASC 815 are categorized as Level 3 fair value measurements within the fair value hierarchy because the Company estimates projections utilizing unobservable inputs. Contingent earn-out payments involve certain assumptions requiring significant judgment and actual results can differ from assumed and estimated amounts.

In determining the fair value of the contingent earn-out liabilities, the Company uses a Monte Carlo simulation model using a distribution of potential outcomes on a monthly basis prioritizing the more reliable information available. The assumptions utilized in the calculation are based on the achievement of certain stock price milestones, including the Company’s stock price at each reporting period, expected volatility, risk-free rate, expected term and expected dividend yield.

The Earn-Out Shares subject to liability accounting were valued using the following assumptions under the Monte Carlo simulation model:

	March 31,		December 31,
	2023		2022
Market price of public stock	$	1.94	$	2.46
Expected share price volatility		83.4%		58.5%
Risk-free interest rate		4.23%		4.42%
Estimated dividend yield		0.0%		0.0%

The change in the fair value of the contingent earn-out liabilities during the three months ended March 31, 2023 was as follows (in thousands):

	Fair Value
Fair value as of December 31, 2022	$	7,160
Change in fair value of earn-out liability		(1,929)
Fair value as of March 31, 2023	$	5,231