Quarterly report pursuant to Section 13 or 15(d)

Private Warrants

v3.21.2
Private Warrants
9 Months Ended
Sep. 30, 2021
Text Block [Abstract]  
Private Warrants

Note 9. Private Warrants

At September 30, 2021 and December 31, 2020, there were 3,914,525 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 then outstanding Private Warrants will expire.

During the quarters ended June 30, 2021 and March 31, 2021, respectively, warrant holders sold 1,565,260 and 518,847 Private Warrants and these Private Warrants became Public Warrants. We valued these Private Warrants on each sale date using the Black Scholes model and reclassified this calculated fair value of each Private Warrant sold to additional paid-in capital. Following the Public Warrant redemption described in Note 11. Private Warrants are no longer convertible to Public Warrants.

During the quarter ended September 30, 2021, a warrant holder exercised 1,338 Private Warrants on a cashless basis and received 720 shares of our common stock.

The Private Warrants meet the definition of derivative instruments and are reported as liabilities in the Financial Statements, 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

)

Gain on remeasurement of private warrants

 

 

 

 

28,392

 

Balance at September 30, 2021

 

 

 

$

(30,910

)

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

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30, 2021

 

 

September 30, 2021

 

 

December 31, 2020

 

Share price of our common stock

 

$

16.34

 

 

$

16.34

 

-

$

44.26

 

 

$

23.51

 

Expected annual dividend yield (1)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Expected volatility (2)

 

 

45

%

 

 

40

%

-

 

45

%

 

 

40.0

%

Risk-free rate of return (3)

 

 

0.81

%

 

 

0.76

%

-

 

0.85

%

 

 

0.36

%

Expected warrant term (years) (4)

 

 

4.24

 

 

 

4.24

 

-

 

4.77

 

 

 

4.99

 

Fair value determined per warrant

 

$

7.90

 

 

$

7.90

 

-

$

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 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.