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Fair value of financial instruments and marketable securities | 9 Months Ended
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Sep. 30, 2017
Fair Value Disclosures [Abstract] |
Fair value of financial instruments and marketable securities | Fair value of financial instruments and marketable securities The Company follows the fair value measurement rules, which provides guidance on the use of fair value in accounting and disclosure for assets and liabilities when such accounting and disclosure is called for by other accounting literature. These rules establish a fair value hierarchy for inputs to be used to measure fair value of financial assets and liabilities. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels: Level 1 (highest priority), Level 2, and Level 3 (lowest priority).
· | Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the balance sheet date.
· | Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
· | Level 3—Inputs are unobservable and reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available.
Cash equivalents and investments are reflected in the accompanying financial statements at fair value. The carrying amount of receivables, accounts payable and accrued expenses, and debt approximates fair value due to the short-term nature of those instruments. Fair value of certain marketable securities is based upon market prices using quoted prices in active markets for identical assets quoted on the last day of the period. In establishing the estimated fair value of the remaining investments, the Company used the fair value as determined by its investment advisors using observable inputs other than quoted prices. The Company reviews its investments on a periodic basis for other-than-temporary impairments. This review is subjective, as it requires management to evaluate whether an event or change in circumstances has occurred in that period that may have a significant adverse effect on the fair value of the investment. The following represents the fair value using the hierarchy described above for the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016:
|  | September 30, 2017
|  | Total |  | Quoted prices in active markets for identical assets (level 1) |  | Significant other observable inputs (level 2) |  | Significant unobservable inputs (level 3)
Marketable securities |  | $ | 27,472 |  |  | $ | — |  |  | $ | 27,472 |  |  | $ | — |
Warrant liability |  | $ | 4 |  |  | $ | — |  |  | $ | — |  |  | $ | 4 |
Stock appreciation rights liability |  | $ | 1,723 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,723 |
|  | December 31, 2016
|  | Total |  | Quoted prices in active markets for identical assets (level 1) |  | Significant other observable inputs (level 2) |  | Significant unobservable inputs (level 3)
Marketable securities |  | $ | 173,345 |  |  | $ | — |  |  | $ | 173,345 |  |  | $ | — |
Warrant Liability |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | 1 |
Stock appreciation rights liability |  | $ | 865 |  |  | $ | — |  |  | $ | — |  |  | $ | 865 |
No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the periods ended September 30, 2017 and December 31, 2016. The following is a summary of marketable securities accounted for as available-for-sale securities at September 30, 2017 and December 31, 2016:
|  | September 30, 2017
|  | Amortized Cost |  | Gross Unrealized |  | Fair Value
|  |  | Gains |  | Losses |
Commercial paper |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Corporate debt securities |  | 27,675 |  |  | 2 |  |  | (205 | ) |  | 27,472 |
Government obligations |  | — |  |  | — |  |  | — |  |  | — |
|  | $ | 27,675 |  |  | $ | 2 |  |  | $ | (205 | ) |  | $ | 27,472 |
|  | December 31, 2016
|  | Amortized Cost |  | Gross Unrealized |  | Fair Value
|  |  | Gains |  | Losses |
Commercial paper |  | $ | 12,919 |  |  | $ | 47 |  |  | $ | — |  |  | $ | 12,966 |
Corporate debt securities |  | 153,240 |  |  | 52 |  |  | (103 | ) |  | 153,189 |
Government obligations |  | 7,188 |  |  | 2 |  |  | — |  |  | 7,190 |
|  | $ | 173,347 |  |  | $ | 101 |  |  | $ | (103 | ) |  | $ | 173,345 |
At September 30, 2017 and December 31, 2016, the Company held securities with an unrealized loss position that were not considered to be other-than-temporarily impaired as the Company has the ability to hold such investments until recovery of their fair value. Unrealized gains and losses are reported as a component of accumulated other comprehensive (loss) income in stockholders’ equity. As of September 30, 2017, the Company had $0.03 million in realized gains resulting from the sale of investments. As of December 31, 2016, the Company did not have any realized gains/losses from the sale of marketable securities. Marketable securities on the balance sheet at September 30, 2017 and December 31, 2016 mature as follows:
|  | September 30, 2017
|  | Less Than 12 Months |  | More Than 12 Months
Commercial paper |  | $ | — |  |  | $ | — |
Corporate debt securities |  | 27,472 |  |  | — |
Government obligations |  | — |  |  | — |
Total Marketable securities |  | $ | 27,472 |  |  | $ | — |
|  | December 31, 2016
|  | Less Than 12 Months |  | More Than 12 Months
Commercial paper |  | $ | 12,966 |  |  | $ | — |
Corporate debt securities |  | 137,196 |  |  | 15,993 |
Government obligations |  | 7,190 |  |  | — |
Total Marketable securities |  | $ | 157,352 |  |  | $ | 15,993 |
The Company classifies all of its securities as current as they are all available for sale and are available for current operations. Level 3 valuation The warrant liability is classified in Other long-term liabilities on the Company’s consolidated balance sheets. The warrant liability is marked-to-market each reporting period with the change in fair value recorded as a gain or loss within Other expense, net, on the Company’s consolidated statements of operations until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. The fair value of the warrant liability is determined at each reporting period by utilizing the Black-Scholes option pricing model. The stock appreciation rights (SARs) liability is classified in Other liabilities on the Company’s consolidated balance sheets. The SARs liability is marked-to-market each reporting period with the change in fair value recorded as compensation expense on the Company’s consolidated statements of operations until the SARS vest. The fair value of the SARs liability is determined at each reporting period by utilizing the Black-Scholes option pricing model. The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuations for the warrant liability and SARs liability for the period ended September 30, 2017:
|  | Level 3 liabilities
|  | Warrants |  | SARs
Beginning balance as of December 31, 2016 |  | $ | 1 |  |  | $ | 865 |
Change in fair value |  | 3 |  |  | 1,922 |
Payments |  | — |  |  | (1,064 | )
Ending balance as of September 30, 2017 |  | $ | 4 |  |  | $ | 1,723 |
Fair value of the warrant liability is estimated using an option-pricing model, which includes variables such as the expected volatility based on guideline public companies, the stock fair value, and the estimated time to a liquidity event. The significant assumptions used in preparing the option pricing model for valuing the Company’s warrants as of September 30, 2017 include (i) volatility (70%), (ii) risk free interest rate (1.47%), (iii) strike price ($128.00-$2,520.00), (iv) fair value of common stock ($20.01), and (v) expected life (1.9—2.0 years). The significant assumptions used in preparing the option pricing model for valuing the Company’s warrants as of December 31, 2016 include (i) volatility (62%-67%), (ii) risk free interest rate (0.62%—1.34%), (iii) strike price ($128.00—$2,520.00), (iv) fair value of common stock ($10.91), and (v) expected life (0.4—2.7 years). Fair value of the SARs liability is estimated using an option-pricing model, which includes variables such as the expected volatility based on guideline public companies, the stock fair value, and the estimated time to a liquidity event. The significant assumptions used in preparing the option pricing model for valuing the Company’s SARs as of September 30, 2017 include (i) volatility (63%—71%), (ii) risk free interest rate (1.06%—1.55%), (iii) strike price ($6.76-$30.86), (iv) fair value of common stock ($20.01), and (v) expected life (0.3—2.3 years). The significant assumptions used in preparing the option pricing model for valuing the Company’s SARs as of December 31, 2016 include (i) volatility (48%-71%), (ii) risk free interest rate (0.44%—1.47%), (iii) strike price ($6.76—$30.86), (iv) fair value of common stock ($10.91), and (v) expected life (0.0—3.0 years).

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- 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 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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