Recurring Fair Value Measurement

3 Months Ended

Mar. 31, 2024

Recurring Fair Value Measurement

NOTE

11-RECURRING

FAIR VALUE MEASUR

MENT

As of March 31, 2024, investment securities in the Company’s Trust Account consisted of $804,228,813

in a demand deposit account. As of December 31, 2023, investment securities in the Company’s Trust Account consisted

of $794,750,266 in a money market fund. See Note 6 for fair value information for the Trust Account.

The fair value of private placement warrants was initially and subsequently measured at fair value using a Black-Scholes Option Pricing Model. For the three months ended March 31, 2024, the Company recognized a gain resulting from a decrease in the fair value of the private placement warrants of $234,667. The gain from change in fair value of the private placement warrants are presented as change in fair value of warrant liability in the accompanying unaudited consolidated statement of operations. For the three months ended March 31, 2023, the Company recognized a gain resulting from a decrease in the fair value of the private placement warrants of $469,333, presented as change in fair value of warrant liability in the accompanying unaudited consolidated statement of operations.

The following table sets forth by level within the fair value hierarchy the Company’s liability that was accounted for at fair value on a recurring basis:


	(Level 1)		(Level 2)		(Level 3)
Private placement warrants as of March 31, 2024	$	—	$	—	$	234,667
PIPE with reduction right liability as of March 31, 2024	$	—	$	—	$	19,399,127


	(Level 1)		(Level 2)		(Level 3)
Private placement warrants as of December 31, 2023	$	—	$	—	$	469,333
PIPE with reduction right liability as of December 31, 2023	$	—	$	—	$	18,253,010

The following table provides quantitative information regarding Level 3 fair value measurements inputs as of their measurement dates:


	March 31, 2024			December 31, 2023
Ordinary share price	$	10.70		$	10.60
Exercise price	$	11.50		$	11.50
Volatility		40	%		45	%
Term		5.11			5.28
Risk-free rate		4.21	%		3.85	%
Dividend yield		0	%		0	%
Probability of completing Lionsgate Business Combination (1)		94.9	%		91.0	%
Probability of completing a different business combination		0.6	% (2)		0.8	% ( 3 )

Note:

The private placement will be forfeited for no consideration if the announced Lionsgate Business Combination is completed (estimated probability of 94.9%

as of March 31, 2024).

(1)

Estimated by solving for the implied probability of completing the Lionsgate Business Combination based on the public warrant price and the contemplated exchange price of $0.50, adjusted for the time value of money.

(2)

Derived as follows: 11%*(1-94.9%), where 11% represents the probability of completing a different business combination based on public trading of rights for special purpose acquisition companies and 94.9% represents the probability of completing the Lionsgate Business Combination.

(3)

Derived as follows:

9%*(1-91%),

where 9% represents the probability of completing a different business combination based on public trading of rights for special purpose acquisition companies and 91% represents the probability of completing the Lionsgate Business Combination.

The change in the fair value of the warrant liabilities for the three months ended March 31, 2024 and 2023 is summarized as follows:


Level 3 Derivative warrant liability at December 31, 2023	$	469,333
Change in fair value of derivative warrant liability		(234,666	)

Level 3 Derivative warrant liability at March 31, 2024	$	234,667


Level 3 Derivative warrant liability at December 31, 202 2	$	3,285,333
Change in fair value of derivative warrant liability		(469,333	)

Level 3 Derivative warrant liability at March 31, 202 3	$	2,816,000

The following table provides quantitative information regarding Level 3 fair value measurement inputs for the PIPE with reduction right liability as of their measurement dates:


Inputs:	As of March 31, 2024			As of December 31, 2023
Ordinary share stock price	$	10.70		$	10.60
Term (1)		0.11			0.28
Risk-free rate of interest (2)		5.37	%		5.20	%
Probability of completing the Lionsgate Business Combination (3)		94.9	%		91	%

(1)

Assumes the transaction closes on May 10, 2024 as of March 31, 2024 and April 10, 2024 as of December 31, 2023.

(2)

Reflects

1-month

U.S. treasury bill rate as of March 31, 2024 and

3-month

U.S. treasury bill rate as of December 31, 2023.

(3)

The change in the fair value of the PIPE with reduction right liability for the quarter ended March 31, 2024 is summarized as follows:


Level 3 PIPE reduction right liability December 31, 2022	$	—
Issuance of PIPE with reduction right liability on December 22, 2023		18,797,300
Change in fair value of PIPE redu c tion right liability		(544,290	)

Level 3 PIPE reduction right liability December 31, 2023		18,253,010
Change in fair value of PIPE redu c tion right liability		1,146,117

Level 3 PIPE reduction right liability March 31, 2024	$	19,399,127

- 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

Screaming Eagle Acquisition Corp. 10-Q