Recurring Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Note 10—Recurring Fair Value Measurements

The following table sets forth by level within the fair value hierarchy the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2022:


	(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities held in Trust Account	$	352,411,509	$	—	$	—
Liabilities
Public Warrants	$	2,242,500	$	—	$	—
Private Placement Warrants	$	—	$	—	$	2,220,000

Total	$	354,654,009	$	—	$	2,220,000

Marketable Securities held in Trust Account

As of June 30, 2022 and December 31, 2021, the assets held in the Trust Account were held in a money market mutual fund. During the three and six months ended June 30, 2022, the Company did not withdraw any of the interest income from the Trust Account to pay its tax obligations.

The composition of the Company’s fair value of held to maturity securities on June 30, 2022 is as follows:


	Fair Value as of June 30, 2022
Money Market Mutual Fund	$	352,411,212
Cash held in Trust Account		297

	$	352,411,509

Warrant Liabilities

As of June 30, 2022 and December 31, 2021, the Company’s warrant liabilities were valued at $4,462,500 and $25,839,000, respectively. Under the guidance in ASC

815-40,

the Public Warrants and the Private Placement Warrants do not meet the criteria for equity treatment. As such, the Public Warrants and the Private 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 valuations 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 is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the warrant liabilities is classified within Level 3 of the fair value hierarchy.

The Company established the initial fair value for the warrants on December 17, 2021, the date of the consummation of the Company’s IPO. The fair value of the Public Warrants and the Private Placement Warrants were measured using a Monte Carlo simulation model. The estimated fair value of the Public Warrants and the Private Placement Warrants were determined using Level 3 inputs. Inherent in a Monte Carlo simulation model are assumptions related to expected share-price volatility, expected life(term) and the risk-free rate of interest rate. The Company estimates the volatility of its warrants based on implied volatility from the historical volatility of Public Warrants for SPACs which have recently had an IPO and have not yet consummated a merger. The risk-free interest rate is based on the U.S. Treasury curve. The expected life of the instruments are assumed to be equivalent to their remaining contractual term plus one year.

The following table presents a summary of the changes in the fair value of the Warrants liabilities classified as Level 3, measured on a recurring basis.


	Private Warrant Liability			Public Warrant Liability			Total Warrant Liability
Fair Value as of March 22, 2021 (inception)	$	—		$	—		$	—
Initial measurement as of December 17, 2021 (IPO date)		13,749,000			13,990,000			27,739,000
Change in fair value		(974,000	)		(926,000	)		(1,900,000	)

Fair Value as of December 31, 2021		12,775,000			13,064,000			25,839,000
Transfer to Level 1		—			(13,064,000	)		(13,064,000	)
Change in fair value		(8,019,000	)		—			(8,019,000	)

Fair Value as of March 31, 2022		4,756,000			—			4,756,000
Change in fair value		(2,536,000	)		—			(2,536,000	)

Fair Value as of June 30, 2022	$	2,220,000		$	—		$	2 ,220,000

The following table provides the significant inputs into the Monte Carlo method for the fair value of the Private Warrants, which are classified as Level 3:


Input	June 30, 2022			December 31, 2021
Share price	$	10.02		$	9.71
Exercise price	$	11.50		$	11.50
Risk-free rate of interest		3.00	%		1.34	%
Volatility		0.59	%		13.24	%
Term (in years)		5.75			5.96
Dividend yield		-	%		-	%

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The Public Warrants underlying the units sold in the IPO began separately trading on February 3, 2022 and as such were reclassified to Level 1 in the quarter ended March 31, 2022. There were no transfers between levels for the quarter ended June 30, 2022.

- 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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