Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Note

8-Fair

Value Measurements

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.


	September 30, 2022
Description	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets:
Investments held in Trust Account-Money market fund	$	346,811,125	$	—	$	—
Liabilities:
Derivative warrant liabilities-Public warrants	$	206,990	$	—	$	—
Derivative warrant liabilities-Private placement warrants	$	—	$	177,760	$	—
Note payable - related party	$	—	$	—	$	450,000


	December 31, 2021
Description	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets:
Investments held in Trust Account-Money market fund	$	345,021,006	$	—	$	—
Liabilities:
Derivative warrant liabilities-Public warrants	$	4,831,580	$	—	$	—
Derivative warrant liabilities-Private placement warrants	$	—	$	4,160,240	$	—

Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement in the quarter ending June 30, 2021 as the Public Warrants were separately listed and traded in an active market during the period. The estimated fair value of the Private Placement Warrants was transferred from a Level 3 measurement to a Level 2 measurement in the quarter ending June 30, 2021, as all of the significant inputs to the valuation model used to estimate the fair value of the Private Placement Warrants became directly or indirectly observable from the listed Public Warrants. Level 1 assets include investments in money market funds.

For the three months ended September 30, 2022 and 2021, the Company recognized an unrealized gain/(loss) in the condensed statements of operations resulting from a decrease in the fair value of derivative warrant liabilities of approximately $1.6 million and $3.6 million, respectively.

For the nine months ended September 30, 2022 and for the period from January 5, 2021 (inception) through September 30, 2021, the Company recognized an unrealized gain/(loss) in the condensed statements of operations resulting from a decrease/(increase) in the fair value of derivative warrant liabilities of approximately $8.6 million and $4.0 million, respectively.

The fair value of the Note Payable was estimated using the market approach as management believes that fair value approximates the transaction price.

The initial fair value of the Public Warrants and Private Placement Warrants was estimated using a Monte Carlo simulation model. Inherent in a Monte Carlo simulation 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 warrants based on implied volatility from the Company’s traded securities and from historical volatility of select peer company’s common stock 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 change in the fair value of the notes payable and derivative warrant liabilities, measured with Level 3 inputs, for the nine months ended September 30, 2022 and 2021, respectively is summarized as follows:


Note payable - related party at January 1, 2022	$	—
Borrowing from sponsor		450,000

Note payable - related party at September 30, 2022	$	450,000
Derivative warrant liabilities at March 3, 2021 (inception)	$	—
Issuance of Public and Private Warrants		13,662,670
Change in fair value of derivative warrant liabilities		(1,026,670	)

Derivative warrant liabilities at March 31, 2021		12,636,000
Transfer of Public Warrants to Level 1		(6,762,000	)
Transfer of Private Placement Warrants to Level 2		(5,874,000	)

Derivative warrant liabilities at 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.

+ References + Details

RXR Acquisition Corp. 10-Q