Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2023

The carrying values and the estimated fair values of debt financial instruments were as follows (in thousands):


	March 31, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
Convertible Notes	$	414,215	$	467,084	$	413,752	$	430,236

The fair value of the Convertible Notes is estimated using Level 2 inputs, as they are not registered securities nor listed on any securities exchange but may be traded by qualified institutional buyers.

The Capped Call is valued using a Black-Sholes model, with the most judgmental non-observable input being the volatility measure. The value of the Capped Call is determined using unobservable inputs and is considered to be a Level 3 value in the fair value hierarchy. The fair value of the Capped Call was $59.5 million at March 31, 2023.

The Put Option is exercisable into both Series A Stock and common stock. The value of the put option is based upon the expected future price of the Series A Stock and the company’s common stock, which is then discounted back to current present value. The present value of the Series A Stock is determined using a discounted cash flow method where the interest rate used for discounting is determined using a single-factor short-rate model. The value of the common stock is determined by using a Monte-Carlo simulation and is then discounted back to present value. The value of the Put Option is determined using unobservable inputs and is considered to be a Level 3 value in the fair value hierarchy. The fair value of the Put Option was $3.8 million at March 31, 2023.

The fair value of the Term Loans and Other Debt is estimated using Level 2 inputs. The carrying values of the Term Loans outstanding under the Senior Secured Credit facility recorded in consolidated balance sheets approximate fair value due to the variable interest rate.

Other Debt totaling $42.1 million, consists of $25.0 million variable rate obligations and $17.1 million fixed rate obligations. Of the $17.1 million fixed rate obligations, $11.7 million mature in 2023 and $5.4 million mature in 2024. Due to the relative short-term maturity of these obligations, the Company believes current carrying value approximates fair value. The carrying value of the $25.0 million variable rate obligations approximate fair value due to the variable nature of the interest rate.