Stock Warrants and Earnouts

3 Months Ended

Apr. 30, 2021

Stock Warrants And Earnouts [Abstract]

9. Stock Warrants and Earnouts

Redeemable Convertible Preferred Stock Warrants

Warrants to purchase a total of 2,358,528

shares of Series B, D and E redeemable convertible preferred stock were initially recognized as a liability recorded at fair value upon issuance and were subject to remeasurement to fair value at each balance sheet date. As part of the Merger, Legacy ChargePoint redeemable convertible preferred stock was converted into Legacy ChargePoint common stock pursuant to the conversion rate effective immediately prior to the Merger while all related Legacy preferred stock warrants were converted into warrants exercisable for shares of Common Stock with terms consistent with the Legacy preferred stock warrants except for the number of shares exercisable therefor and the exercise price, each of which was adjusted using the Exchange Ratio. At that time, the ChargePoint redeemable convertible preferred stock warrant liability was remeasured and reclassified to Legacy ChargePoint

additional paid-in capital.

The liability associated with these warrants was subject to remeasurement at each balance sheet date using the Level 3 fair value inputs. See Note 4 for further details.

The Level 3 fair value inputs used in the recurring valuation of the redeemable convertible preferred stock warrant liability were as follows:


	February 26, 2021 (Merger Date)			January 31, 2021
Expected volatility		84.3	%		80.5	%
Risk-free interest rate		0.0	%		0.1	%
Dividend rate		0.0	%		0.0	%
Expected term (years)		0.0			1.4

Common Stock Warrants

In addition to the warrants to purchase 2,358,528 shares of Legacy ChargePoint preferred stock described above, Legacy ChargePoint had outstanding warrants to purchase

36,402,503

shares of Legacy ChargePoint common stock, which now represent warrants to purchase Common Stock.

Private Placement Warrants

The Private Placement Warrants were initially recognized as a liability on February 26, 2021

at a fair value

of $127.9 million and the Private Placement

arrant liability was remeasured to fair value as of

any

respective exercise dates and as of April 30, 2021, resulting in a gain of $45.4 million for the three months ended April 30, 2021,

classified within change in fair value of warrant liabilities in the condensed consolidated statements of operations.

The Private Placement

arrants were valued using the following assumptions under the Binomial-Lattice Model (“BLM”) that assumes optimal exercise of the Company’s redemption option at the earliest possible date:


	April 30, 2021			February 26, 2021
Market price of public stock		25.3			30.8
Exercise price		11.5			11.5
Expected term (years)		4.8			5.0
Volatility		73.2	%		73.5	%
Risk-free interest rate		0.8	%		0.8	%
Dividend rate		0.0	%		0.0	%

Public Warrants

The

Public Warrants may only be exercised for a whole number of shares. The Public Warrants bec

me exercisable 30 days after the completion of the

Merger.

The Public Warrants were initially recognized as a liability on February 26, 2021 at a fair value

of $153.7

million and the public warrant liability was remeasured to fair value based upon the market price as warrants were exercised and as of April 30, 2021, resulting in a loss of

$1.6

million for the three months ended April 30, 2021, classified within change in fair value of warrant liabilities in the condensed consolidated statements of operations.

During the three months ended April 30, 2021, net proceeds for exercised Public Warrants w

ere

$73.3

million.

Activity of warrants is set forth below:


	Legacy Common and Preferred Stock Warrants (1)			Private Placement Warrants			Public Warrants			Total Common Stock Warrants (1)
Outstanding as of January 31, 2021		38,761,031			—			—			38,761,031
Common Stock Warrants as Part of the Merger		—			6,521,568			10,470,562			16,992,130
Warrants Exercised		(1,097,305	)		(4,347,712	)		(6,413,057	)		(11,858,074	)

Outstanding as of April 30, 2021		37,663,726			2,173,856			4,057,505			43,895,087

(1)	The shares (and the warrants’ exercise prices) subject to the Company’s Legacy common and preferred stock warrants were restated to reflect the exchange ratio of approximately 0.9966 established in the Merger Agreement as discussed in Note 3.

Contingent Earnout Liability

During the five year period starting at the closing of the Merger (“Earnout Period”), eligible former equity holders of Legacy ChargePoint may receive up to

27,000,000

additional shares of Common Stock (“Earnout Shares”) in the aggregate in three equal tranches if certain Earnout Triggering Events (as described in the Merger Agreement) are fully satisfied. An “Earnout Triggering Event” means the date on which the closing volume weighted-average price (“VWAP”) per share of common stock quoted on the NYSE (or the exchange on which the shares of common stock are then listed) is greater or equal to

15.00

, $

20.00

and $

30.00

for any

ten

trading days within any

consecutive trading day period within the Earnout Period.

Upon the closing of the Merger, the contingent obligation to issue Earnout Shares was accounted for as a liability because the Earnout Triggering Events that determine the number of Earnout Shares required to be issued include events that are not solely indexed to the common stock of ChargePoint. The estimated fair value of the total Earnout Shares at the closing of the Merger on February 26, 2021

was

$828.2 million based on a Monte Carlo simulation valuation model using a distribution of potential outcomes on a monthly basis over the Earnout Period using the most reliable information available. Assumptions used in the valuation are described below.


	March 12, 2021			February 26, 2021
Current stock price		27.84			30.83
Expected volatility		72.00	%		71.60	%
Risk-free interest rate		0.85	%		0.75	%
Dividend rate		0.00	%		0.00	%
Expected term (years)		4.96			5.00

The first two Earnout

Triggering Events for up to 18,000,000 of the Earnout Shares occurred on March 12, 2021

and, after the withholding of some of these Earnout Shares for tax withholding, 17,539,657

Earnout Shares were issued on March 19, 2021

and the estimated fair value of the earnout liability was remeasured to $743.7 million, including (i) $501.1 million related to the Earnout Shares issuable upon the occurrence of the Earnout Triggering Event associated with the $15.00 and $20.00 VWAP per share thresholds based on the Common Stock price as of March 12, 2021

and (ii) $242.6 million related to the estimated fair value of earnout liability related to the remaining 9,000,000 Earnout Shares issuable upon the occurrence of the Earnout Triggering Event associated with the $30.00 VWAP per share threshold based on a Monte Carlo simulation valuation model as of March 12, 2021, as described above. The change in fair value resulted in a gain of $84.4 million recognized in the condensed consolidated statement of operations for the three months ended April 30, 2021.

Upon settlement of the first two tranches, the classification of the remaining 9,000,000 Earnout Shares of the third tranche was changed to equity on March 12, 2021, because the Earnout Shares became an instrument contingently issuable upon the occurrence of the Earnout Triggering Event into a fixed number of Common Shares that is not based on an observable market price or index other than the Company’s own stock price.