P3 Health Partners Inc. General form of registration statement for all companies including face-amount certificate companies

General form of registration statement for all companies including face-amount certificate companies

Fair Value Measurements and Hierarchy

Fair Value Measurements and Hierarchy

3 Months Ended

12 Months Ended

Mar. 31, 2023

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements and Hierarchy

Note 5: Fair Value Measurements and Hierarchy

Information about the Company’s financial liabilities measured at fair value on a recurring basis is presented below:


	Level 1		Level 2		Level 3		Total

	(in thousands)
Warrant liability as of March 31, 2023	$	844	$	—	$	24	$	868
Warrant liability as of December 31, 2022	$	1,477	$	—	$	40	$	1,517

The key Level 3 inputs into the option pricing model related to the private placement warrants to purchase Class A common stock were as follows:


	March 31, 2023			December 31, 2022
Volatility		73.0	%		55.0	%
Risk-free interest rate		3.8	%		4.1	%
Exercise price	$	11.50		$	11.50
Expected term		3.7	years		3.9	years

The following tables set forth a summary of changes in the fair value of the Company’s private placement warrants to purchase Class A common stock, which are considered to be Level 3 fair value measurements:


	Three Months Ended March 31,
	2023		2022

	(in thousands)
Beginning balance	$	40	$	502
Mark-to-market adjustment		(16)		(19)
Ending balance	$	24	$	483

Note 6: Fair Value Measurements and Hierarchy

Information about the Company’s financial liabilities measured at fair value on a recurring basis is presented below:


	December 31, 2022
	Carrying Value		Level 1		Level 2		Level 3
Financial liabilities:
Liability for private placement warrants	$	40	$	—	$	—	$	40
Liability for public warrants	$	1,477	$	1,477	$	—	$	—


	December 31, 2021
	Carrying Value		Level 1		Level 2		Level 3
Financial liabilities:
Liability for private placement warrants	$	502	$	—	$	—	$	502
Liability for public warrants	$	10,881	$	10,881	$	—	$	—

The key Level 3 inputs into the option pricing model related to the private placement warrants to purchase Class A common stock were as follows:


	December 31,
	2022			2021
Volatility		55	%		60	%
Risk-free interest rate		4.11	%		1.26	%
Exercise price	$	11.50		$	11.50
Expected term		3.9	Years		4.9	Years

Generally, an increase in the market price of the Company’s shares of common stock, an increase in the volatility of the Company’s shares of common stock, and an increase in the remaining term of the warrants would each result in a directionally similar change in the estimated fair value of the Company’s warrant liabilities. Such changes would increase the associated liability while decreases in these assumptions would decrease the associated liability. An increase in the risk-free interest rate would result in a decrease in the estimated fair value measurement and thus a decrease in the associated liability. The Company has not, and does not plan to, declare dividends on its common stock and, as such, there is no change in the estimated fair value of the warrant liabilities due to the dividend assumption.

The following table sets forth a summary of changes in the fair value of the Company’s private placement warrants, which are considered to be Level 3 fair value measurements:


	Successor				Predecessor
	Year		December 3, 2021
	Ended		through
	December		December 31,		January 1, 2021
	31, 2022		2021		through
	(Private		(Private		December 2, 2021
	Placement		Placement		(Class D
	Warrants)		Warrants)		Warrants)
Beginning balance	$	502	$	793	$	6,316
Mark-to-market adjustment of stock warrants		(462)		(291)		7,665
Ending balance	$	40	$	502	$	13,981

The Company recorded gains on the changes in the fair value of public warrants of $9.4 million and $2.3 million during the year ended December 31, 2022 and the Successor Period of 2021, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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