Annual report pursuant to Section 13 and 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
11 Months Ended
Dec. 31, 2021
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

NOTE 9. FAIR VALUE MEASUREMENTS

 

The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis at December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

                               
Description   Amount at
Fair Value
    Level 1     Level 2     Level 3  
December 31, 2021                                
Liabilities                                
Warrant liability – Public Warrants   $ 4,998,812     $ 4,998,812          
Warrant liability – Private Placement Warrants   $ 4,499,287             $ 4,499,287  
    $ 9,498,099     $ 4,998,812           $ 4,499,287  

 

The Company utilized a Monte Carlo simulation model for the initial valuation of the Public Warrants. The subsequent measurement of the Public Warrants as of December 31, 2021 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker SEDA.WS. The quoted price of the Public Warrants was $0.50 per warrant as of December 31, 2021.

 

The Company utilizes a Monte Carlo simulation model to value the Private Placement Warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the Private Placement warrant liability is determined using Level 3 inputs. Inherent in a Monte Carlo Simulation model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

 

The aforementioned warrant liabilities are not subject to qualified hedge accounting.

 

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants in the table above were transferred from a Level 3 measurement to a Level 1 fair value measurement in December 2021 when the Public Warrants were separately listed and traded.

 

The following table provides the significant inputs to the Monte Carlo simulation model for the fair value of the Public Warrants:

 

       
    At
November 2,
2021
(Initial Measurement)
 
Stock price   $ 9.51  
Exercise price   $ 11.50  
Expected term (in years)     6.50  
Volatility     15.0 %
Risk-free rate     1.03 %
Fair value   $ 0.98  

 

The following table provides the significant inputs to the Monte Carlo simulation model for the fair value of the Private Placement Warrants:

 

               
    At
November 2,
2021
(Initial Measurement)
    At
December 31,
2021
 
Stock price   $ 9.51     $ 9.74  
Exercise price   $ 11.50     $ 11.50  
Dividend yield     %     %
Expected term (in years)     6.50       6.34  
Volatility     15.0 %     8.3 %
Risk-free rate     1.03 %     1.37 %
Fair value   $ 0.98     $ 0.50  

 

The following table presents the changes in the fair value of the Company’s Level 3 financial instruments:

 

       
Fair value at February 16, 2021 (inception)   $  
Initial measurement of Public Warrants and Private Placement Warrants as of November 2, 2021     16,660,000  
Initial measurement of Public Warrants and Private Placement Warrants upon exercise of over-allotment on November 16, 2021     1,956,274  
Change in fair value     (9,118,176 )
Transfer of Public Warrants to Level 1 measurement     (4,998,812 )
Fair value as of December 31, 2021   $ 4,499,287  

 

The Company recognized gains in connection with changes in the fair value of the Public Warrants and Private Placement Warrants of $9,118,176, which comprise the change in fair value of warrant liabilities in the Statement of Operations for the period from February 16, 2021 (inception) through December 31, 2021.