XML 30 R19.htm IDEA: XBRL DOCUMENT
v3.5.0.2

Fair Value Measurement | 9 Months Ended
--- | ---
Sep. 30, 2016
Fair Value Disclosures [Abstract] |
Fair Value Measurement | Note 13: Fair Value Measurement Determining which category an asset or liability falls within the fair value accounting guidance hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter. Assets and liabilities measured at fair value on a recurring basis are summarized as follows: The financial instrument that is measured at fair value on a recurring basis is summarized as follows as of September 30, 2016:
Liabilities |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | September 30, 2016 |
Derivative liability - embedded conversion feature |  | $ | — |  |  | $ | — |  |  | $ | 58,261 |  |  | $ | 58,261 |
The financial instrument that is measured at fair value on a recurring basis is summarized as follows as of December 31, 2015:
Liabilities |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | December 31, 2015 |
Derivative liability - embedded conversion feature |  | $ | — |  |  | $ | — |  |  | $ | 120,848 |  |  | $ | 120,848 |
The following table shows the change in Level 3 liability measured at fair value on a recurring basis for the year ended December 31, 2015 and the nine months ended September 30, 2016:
|  | Derivative liability embedded conversion feature |
Balance, January 1, 2015 |  | $ | — |
Issuance during 2015 |  |  | 66,227 |
Unrealized loss on change in fair value |  |  | 54,621 |
Balance, December 31, 2015 |  |  | 120,848 |
Issuance during 2016 |  |  | — |
Unrealized (gain) on change in fair value |  |  | (62,587 | )
Balance, September 30, 2016 |  | $ | 58,261 |
On January 5, 2015, WMIH raised $600.0 million of capital (less transaction costs) through the issuance of 600,000 shares of Series B Preferred Stock. The shares carry a liquidation preference of $1,000 per share, equal to their initial purchase price. In addition, they have a mandatory redemption right three years from issuance date at a price equal to the initial investment amount, plus accrued dividends at 3% per annum. The purpose of the capital raise was principally to pursue strategic acquisitions of operating companies that fit the Company’s desired business model. Management intends to pursue such an acquisition or acquisitions with the proceeds of the capital raise, and should it occur during the three-year term of the Series B Preferred Stock, there is a mandatory conversion of these shares into common stock of WMIH. Mandatory conversion occurs at a price that is the lesser of:
i) | $2.25 per share of WMIH common stock; and
ii) | the arithmetic average of daily volume weighted-average prices of WMIH’s common stock during the 20 trading day period ending on the trading day immediately preceding the public announcement by WMIH of its entry into a definitive agreement for such acquisition, subject to a floor of $1.75 per share of WMIH common stock.
We use a binomial lattice option pricing model to value the embedded conversion feature that is subject to fair value liability accounting. The key inputs which we utilize in the determination of the fair value as of the reporting date include our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the convertible preferred securities, which we estimated at 35% as of September 30, 2016 and 40% as of December 31, 2015, and risk-free interest rate, which was estimated at 0.4% as of September 30, 2016 and 0.6% as of December 31, 2015. In addition, the model requires the input of an expected probability of occurrence, which we estimated at 90% for both September 30, 2016 and December 31, 2015, and the timing of a Qualified Acquisition which initiates the mandatory conversion, which we estimated at 6 months from September 30, 2016 and 12 months from December 31, 2015. The fair value of the embedded conversion feature liability is revalued each balance sheet date utilizing our model computations with the decrease or increase in fair value being reported in the statement of operations as unrealized gain or (loss) on change in fair value of derivative liability - embedded conversion feature, respectively. The primary factors affecting the fair value of the embedded conversion feature liability are the probability of occurrence and timing of a Qualified Acquisition, our stock price and our stock price volatility. In addition, the use of a model requires the input of subjective assumptions, and changes to these assumptions could provide differing results. Our reported net income was approximately $61.3 million for the nine months ended September 30, 2016. The change to our net income resulting from the calculation of the fair value of the embedded conversion feature liability is analyzed at the end of each reporting period to assess the impact of a 10% change to the various inputs and the result of each change is highlighted in the following scenarios. If the closing stock price of our common stock had been 10% lower, our net income would have been approximately $39.4 million higher. If the closing stock price of our common stock had been 10% higher, our net income would have been approximately $42.5 million lower. If our volatility assumption on September 30, 2016 had been 10% lower, our net income would have been approximately $8.6 million higher and if our volatility assumption had been 10% higher, our net income would have been approximately $4.2 million lower. If our probability of a transaction occurring assumption on September 30, 2016 had been 10% lower, our net income would have been approximately $6.5 million higher and if our probability of a transaction occurring assumption had been 10% higher, our net income would have been approximately $6.5 million lower.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration