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FAIR VALUE MEASUREMENT

3 Months Ended

Mar. 31, 2024

FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, when available. If such quoted market prices are not available, fair value is based upon models that use, as inputs, observable market-based parameters to the greatest extent possible.

Financial Assets and Liabilities Recorded at Fair Value

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in thousands):


	March 31, 2024

	Level 1		Level 2		Level 3		Total
Assets:
Investments in loans and securities (Notes)	$	—	$	69,030	$	104,782	$	173,812
Investments in loans and securities (Certificates and Other loans and receivables)	—		—		720,339		720,339
Liabilities:
Warrant liability	$	872	$	470	$	—	$	1,342


	December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Investments in loans and securities (Notes)	$	—	$	90,425	$	—	$	90,425
Investments in loans and securities (Certificates and Other loans and receivables)	—		—		626,368		626,368
Liabilities:
Warrant liability	$	2,106	$	1,136	$	—	$	3,242

There were no transfers between levels during the periods ended March 31, 2024 and December 31, 2023.

Assets and Liabilities Measured at Fair Value on a Recurring Basis (Level 1 and 2)

Warrant liability (Level 1 and 2)

The Company used the value of the Public Warrants (Level 1) as an approximation of the value of the Private Warrants as they are substantially similar to the Public Warrants, but not directly traded or quoted on an active market.

The following tables summarize the Warrant liability activity for the three months ended March 31, 2024 and 2023 (in thousands):







Balance as of December 31, 2022	$	1,400


Change in fair value	(190)

Balance as of March 31, 2023	$	1,210

Balance as of December 31, 2023	$	3,242
Change in fair value	(1,900)
Balance as of March 31, 2024	$	1,342

Assets and Liabilities Measured at Fair Value on a Recurring Basis (Level 3)

Investments in Loans and Securities Available for Sale (Level 3)

As of March 31, 2024, the Company held investments in loans and securities classified as available for sale. These assets are measured at fair value using a discounted cash flow model, and presented within investments in loans and securities on the consolidated balance sheets. Changes in the fair value, other than declines in fair value due to credit, are reflected in other comprehensive income (loss) on the consolidated statements of comprehensive income (loss). Declines in fair value due to credit are reflected in other income (expenses), net on the consolidated statements of operations.

The following tables summarize the activity related to the fair value of the investments in loans and securities available for sale for the three months ended March 31, 2024 and 2023 (in thousands):


	Three Months Ended March 31,
	2024		2023
Balance, beginning of period	$	716,793	$	—
Transfer from held-to-maturity to available for sale at fair value	—		480,437
Additions	261,638		121,731
Cash received	(35,897)		(25,985)

Change in fair value	(21,531)		(670)
Credit-related impairment loss	(26,851)		(68,347)
Balance, end of period	$	894,151	$	507,166

Significant unobservable inputs used for our Level 3 fair value measurement of the loans and securities are the discount rate, loss rate, and prepayment rate. Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the loans and securities as of March 31, 2024 and December 31, 2023:


	March 31, 2024
Unobservable Input	Minimum		Maximum	Weighted Average
Discount rate	8.0	%	20.0%	16.7%
Loss rate	6.2	%	31.0%	17.2%
Prepayment rate	0.0	%	40.0%	9.1%


	December 31, 2023
Unobservable Input	Minimum		Maximum	Weighted Average
Discount rate	8.0	%	15.0%	15.0%
Loss rate	4.9	%	31.0%	15.7%
Prepayment rate	4.0	%	40.0%	9.9%

Financial Assets and Liabilities Not Recorded at Fair Value

The Company believes that the carrying amount of cash, cash equivalents and restricted cash, fees and other receivables, accounts payables and other current liabilities approximate their fair value due to the short-term maturities of these instruments.

The below tables contain information about assets that are not measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 (in thousands):


	March 31, 2024
			Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Cash, cash equivalents and restricted cash	$	310,049	$	310,049	$	—	$	—	$	310,049


Fees and other receivables	122,600		—		122,600		—		122,600
Total assets	$	432,649	$	310,049	$	122,600	$	—	$	432,649


	December 31, 2023
			Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Cash, cash equivalents and restricted cash	$	222,541	$	222,541	$	—	$	—	$	222,541


Fees and other receivables	113,707		—		113,707		—		113,707
Total assets	$	336,248	$	222,541	$	113,707	$	—	$	336,248

- 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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