Quarterly report pursuant to Section 13 or 15(d)

Private Warrants

v3.21.2
Private Warrants
6 Months Ended
Jun. 30, 2021
Text Block [Abstract]  
Private Warrants

Note 9. Private Warrants

At June 30, 2021 and December 31, 2020, there were 3,915,893 and 6,000,000 outstanding warrants, respectively, to purchase shares of our common stock at an exercise price of $11.50 per share, subject to adjustments, that had been privately placed prior to the Business Combination (“Private Warrants”). The warrants are exercisable at any time after May 7, 2021, and we do not have any right to compel the exercise or redemption of the Private Warrants. All Private Warrants transferred, assigned, or sold to anyone other than certain affiliates of Live Oak prior to June 16, 2021 became Public Warrants (as defined in Note 11). On December 28, 2025, any remaining outstanding Private Warrants will expire.

During the quarters ended June 30, 2021 and March 31, 2021, respectively, holders of 1,565,260 and 518,847 Private Warrants sold them and the Private Warrants became Public Warrants. We valued these Private Warrants on each sale date using the Black Scholes model and reclassified the fair value of each Private Warrant to additional paid-in capital.

The Private Warrants meet the definition of a derivative instrument and are reported as liabilities at June 30, 2021 and December 31, 2020, with changes in the fair value of the private warrants recorded in earnings. The Private Warrants are Level 3 financial instruments. A rollforward of the Private Warrants liability is below.

(in thousands)

 

 

 

 

 

Balance at December 31, 2020

 

 

 

$

(82,860

)

Loss on remeasurement of Private Warrants

 

 

 

 

(80,697

)

Fair value of Private Warrants sold

 

 

 

 

13,922

 

Balance at March 31, 2021

 

 

 

 

(149,635

)

Gain on remeasurement of Private Warrants

 

 

 

 

58,740

 

Fair value of Private Warrants sold

 

 

 

 

31,593

 

Balance at June 30, 2021

 

 

 

$

(59,302

)

 

The table below sets forth the inputs we used in our Black-Scholes models for Private Warrant valuations and the fair values determined.

 

 

As Of

 

 

Three Months Ended

 

 

Six Months Ended

 

 

As Of

 

 

 

June 30, 2021

 

 

June 30, 2021

 

 

June 30, 2021

 

 

December 31, 2020

 

Share price of our common stock

 

$

25.05

 

 

$

17.45

 

-

$

38.33

 

 

$

17.45

 

-

$

44.26

 

 

$

23.51

 

Expected annual dividend yield (1)

 

 

0

%

 

 

 

 

 

0

%

 

 

 

 

 

0

%

 

 

0

%

Expected volatility (2)

 

 

40

%

 

 

 

 

 

40

%

 

 

 

 

 

40

%

 

 

40.0

%

Risk-free rate of return (3)

 

 

0.76

%

 

 

 

 

 

0.76

%

 

 

0.76

%

-

 

0.85

%

 

 

0.36

%

Expected warrant term (years) (4)

 

 

4.50

 

 

 

4.50

 

-

 

4.73

 

 

 

4.50

 

-

 

4.99

 

 

 

4.99

 

Fair value determined per warrant

 

$

15.14

 

 

$

8.53

 

-

$

27.82

 

 

$

8.53

 

-

$

33.65

 

 

$

13.81

 

 

(1)

We have not paid and do not currently anticipate paying a cash dividend on our common stock.

(2)

We estimated expected volatilities using stock data for select peer public companies over a timeframe similar to the expected term. We selected peer companies using our judgment and as such, expected volatility is a Level 3 input.

(3)

We estimated risk-free rates based on the expected terms using the U.S. Treasury yield curve in effect as of the valuation dates.

(4)

 The expected warrant terms are equal to the remaining contractual life of the Private Warrants at each measurement date.