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Recurring Fair Value Measurements

7 Months Ended

Sep. 30, 2021

Note 7 — Recurring Fair Value Measurements

As at September 30, 2021, the Company’s warrant liability was valued at $10,062,785. Under the guidance in ASC 815-40 the warrants do not meet the criteria for equity treatment. As such, the warrants 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, the warrant valuation will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.

The Company’s warrant liability for the Private Placement Warrants is based on a valuation model utilizing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. The fair value of the Private Placement Warrant liability units is classified within Level 3 of the fair value hierarchy.

On September 20, 2021, the Company’s Public Warrants began trading on the New York Stock Exchange. As such, the Company’s warrant liability for the Public Warrants is based on unadjusted quoted prices in an active market (the New York Stock Exchange) for identical assets or liabilities that the Company can access. The fair value of the Public Warrant liability is classified within Level 1 of the fair value hierarchy.

All of the Company’s trust assets on the condensed 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 as of September 30, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.


	September 30, 2021		Level 1		Level 2		Level 3
Assets:
U.S. Money Market held in Trust Account	$	265,150,291	$	265,150,291	$	—	$	—
	$	265,150,291	$	265,150,291	$	—	$	—
Liabilities:
Public Warrants	$	6,196,164	$	6,196,164	$	—	$	—
Private Placement Warrants		3,866,621		—		—		3,866,621
	$	10,062,785	$	6,196,164	$	—	$	3,866,621

The Company established the initial fair value for the Warrants on August 2, 2021, the date of the consummation of the Company’s IPO and September 3, 2021, the date of the Underwriter’s exercise of its over-allotment option, respectively. The Company used a Black-Scholes model to value the Public and Private Warrants.

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


	September 30,			August 2,
	2021			2021
Stock price	$	10.00		$	10.00
Strike price	$	11.50		$	11.50
Term (in years)		5.59			5.84
Volatility		10.9	%		24.0
Risk-free rate		1.07	%		1.01
Dividend yield		0	%		0

The following table provides a reconciliation of changes in fair value liability of the beginning and ending balances for the Company’s Warrants as Level 3:


Fair value at March 11, 2021 (inception)	$	—
Initial fair value		23,462,850
Public Warrants reclassified to level 1⁽¹⁾		(6,196,164)
Change in fair value		(13,400,065)
Fair Value at September 30, 2021	$	3,866,621

(1)Assumes the Public Warrants were reclassified on September 30, 2021.

Except for the transfer from Level 3 to Level 1 for the Public Warrants, there were no other transfers between Levels 1, 2 or 3 during the period from March 11, 2021 (inception) to September 30, 2021.

- 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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