Fair Value Measurements

3 Months Ended

Mar. 31, 2022

NOTE

. FAIR VALUE MEASUREMENTS

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:


Level 1:		Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:		Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3:		Unobservable inputs based on an assessment of the assumptions that market participants would use in pricing the asset or liability.

Transfers between fair value levels are recorded at

the end of

each reporting period.

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


Description	Level		March 31, 2022		Level		December 31, 2021
Assets:
Investments held in Trust Account—U.S. Treasury Bill-backed Money Market Funds		1	$	238,190,583		1	$	238,188,617
Liabilities:
Warrant liability—Public warrants		2	$	3,652,048		1	$	4,445,971
Warrant liability—Private Placement Warrants		2	$	2,074,152		2	$	2,525,055

At March 31, 2022, assets held in the Trust Account were comprised of $238,190,583

in U.S. Treasury Bill-backed Money Market Funds. During the three months ended March 31, 2022 and March 31, 2021, the Company did not withdraw any interest income from the Trust Account.

Warrants—Subsequent Measurement

The Warrants are measured at fair value on a recurring basis. The subsequent measurement of the Public Warrants for each quarterly reporting period is classified as Level 1 when an observable market quote in an active market is available. When the Public Warrants do not trade in an active market on the measurement date , the Public Warrants are classified as Level 2. When an observable market quote in an active market is not available, a binomial lattice model is used to value the warrant liability, and the Public Warrants are classified as Level 3. The subsequent measurement of the Private Placement Warrants for each quarterly reporting period is classified as Level 2 when a quoted market price for a similar liability is available. When an observable market quote is not available, a binomial lattice model is used and the Private Placement Warrants are classified as Level 3.

The aforementioned warrant liabilities are not subject to qualified hedge accounting.

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


	At March 31, 2021

Unit price	$	10.00
Strike price	$	11.50
Term (in years)		1.0
Volatility		13.5	%
Risk-free rate		1.08	%
Dividend yield		0.0

The following table presents the changes in the fair value of warrant liability for the period from January 15, 2021 (Inception) to March 31, 2021:


	Private Placement			Public			Warrant Liability
Fair value as of January 15, 2021	$	—		$	—		$	—
Initial measurement on March 12, 2021		3,832,673			6,748,349			10,581,022
Change in fair value of warrant liability		(811,625	)		(1,429,062	)		(2,240,687	)

Fair value as of March 31, 2021	$	3,021,048		$	5,319,287		$	8,340,335

- 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

Sandbridge X2 Corp 10-Q