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Fair Value Measurements

3 Months Ended

12 Months Ended

Mar. 31, 2021

Dec. 31, 2020

Fair Value Measurements

4. FAIR VALUE MEASUREMENTS

Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. At March 31, 2021 and December 31, 2020, the carrying amount of accounts receivable, other current assets, other assets, accounts payable, and accrued and other current liabilities approximated their estimated fair value due to their relatively short maturities.

The following table provides the financial instruments measured at fair value (in thousands):

		March 31, 2021
		Level 1			Level 2			Level 3			Total
Assets
Cash equivalents:
Money market fund		$	67		$	—		$	—		$	67
Liabilities
Convertible preferred stock warrant liability		$	—		$	—		$	161,486		$	161,486
Total liabilities		$	—		$	—		$	161,486		$	161,486


		December 31, 2020
		Level 1			Level 2			Level 3			Total

Assets
Cash equivalents:
Money market fund		$	67		$	—		$	—		$	67
Liabilities
Convertible preferred stock warrant liability		$	—		$	—		$	95,342		$	95,342
Total liabilities		$	—		$	—		$	95,342		$	95,342

The Company’s money market funds are classified as Level 1 because they are valued using quoted market prices. The convertible preferred stock warrant liabilities are defined as Level 3 in the fair value hierarchy as the valuations are based on significant unobservable inputs, which reflect the Company’s own assumptions incorporated in valuation techniques used to determine fair value; further discussion of these assumptions is set forth below. There were no transfers into or out of Level 3 of the fair value hierarchy during the periods presented.

Convertible Preferred Stock Warrant Liabilities

The fair value of the detachable redeemable preferred stock warrants was determined as of March 31, 2021 using the Black-Scholes method as well as a discount for lack of marketability. Black-Scholes inputs used to value the warrants are based on information from purchase agreements and within valuation reports prepared by an independent third party for the Company. Inputs include exercise price, volatility, fair value of common or preferred stock, expected dividend rate and risk-free interest rate.

The key assumptions used for the valuation of the preferred stock warrant liabilities upon remeasurement were as follows:


		Three Months Ended March 31,
		2021		2020
Volatility		65.0	%	75.0	%
Risk-free interest rate		0.1	%	0.3	%
Expected term (in years)		1.2		2.3
Dividend yield		—	%	—	%
Discount for lack of marketability		6.8	%	40.0	%

The following table presents the changes in the liability for warrants on convertible preferred stock during the three months ended March 31, 2021 (in thousands):


		Convertible Preferred Warrant Warrant Stock
Balance as of December 31, 2020		$	95,342
Change in fair value of warrants			66,397
Exercised warrants			(253)
Balance as of March 31, 2021		$	161,486

4.FAIR VALUE MEASUREMENTS

Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. At December 31, 2020 and 2019, the carrying amount of cash and cash equivalents, accounts receivable, other current assets, other assets, accounts payable, and accrued and other current liabilities approximated their estimated fair value due to their relatively short maturities.

The following table provides the financial instruments measured at fair value (in thousands):


					December 31, 2020
		Level 1			Level 2			Level 3			Total
Assets
Cash equivalents:		$	67		$	—		$	—		$	67
Money market fund
Liabilities
Convertible preferred stock warrant liabilities		$	—		$	—		$	95,342		$	95,342
Embedded derivative liabilities		$	—		$	—		$	—		$	—
Total liabilities		$	—		$	—		$	95,342		$	95,342


					December 31, 2019
		Level 1			Level 2			Level 3			Total
Assets
Cash equivalents:		$	67		$	—		$	—		$	67
Money market fund
Liabilities
Convertible preferred stock warrant liabilities		$	—		$	—		$	6,094		$	6,094
Embedded derivative liabilities		$	—		$	—		$	786		$	786
Total liabilities		$	—		$	—		$	6,880		$	6,880

The Company’s money market funds are classified as Level 1 because they are valued using quoted market prices. The convertible preferred stock warrant liabilities and embedded derivatives are defined as Level 3 in the fair value hierarchy as the valuations are based on significant unobservable inputs, which reflect the Company’s own assumptions incorporated in valuation techniques used to determine fair value; further discussion of these assumptions is set forth below. There were no transfers into or out of Level 3 of the fair value hierarchy during the periods presented.

Convertible Preferred Stock Warrant Liabilities

The fair value of the detachable redeemable preferred stock warrants was determined as of December 31, 2020 and 2019 using the Black-Scholes method as well as a discount for lack of marketability. Black- Scholes inputs used to value the warrants are based on information from purchase agreements and within valuation reports prepared by an independent third party for the Company. Inputs include exercise price, volatility, fair value of common or preferred stock, expected dividend rate and risk-free interest rate.

The key assumptions used for the valuation of the preferred stock warrant liabilities upon remeasurement were as follows:


		Year Ended December 31,
		2020		2019
Volatility		65.0	%	65.0	%
Risk-free interest rate		0.1	%	1.6	%
Expected term (in years)		1.5		2.5
Dividend yield		—	%	—	%
Discount for lack of marketability		12.3	%	40.0	%

The following table presents the changes in the liability for warrants on convertible preferred stock during the years ended December 31, 2020 and 2019 (in thousands):


		December 31,
		2020			2019
Beginning balance at January 1,		$	6,094		$	1,700
Issuance of warrants			3,633			3,999
Change in fair value of warrants			85,623			395
Exercised warrants			(8)			—
Ending balance at December 31,		$	95,342		$	6,094

Embedded Derivatives

The fair value of the derivative liability related to the Company’s issuance of certain convertible notes discussed in Note 11 was estimated using a with and without method. This method isolates the value of the embedded derivative by measuring the difference in the host contract’s value with and without the isolated feature. The resulting cash flows are discounted at the Company’s borrowing rate, as adjusted for fluctuations in the market interest rate from the inception of the Company’s comparative borrowings to the reporting date, to measure the fair value of the embedded derivative. The valuation for the conversion portion of the derivative factors in the expected timing and probability of a qualified financing that would result in the conversion of the underlying (refer to Note 11 for further discussion of the terms), plus accrued interest discounted to the qualified financing price per share. The probability and timing of a qualified financing are estimated at each reporting date. As of December 31, 2020, the Company determined the probability of a qualified financing to be minimal and, as such, the estimated value of the derivative is $0.

The following table sets forth a summary of the changes in fair value of the embedded derivative liabilities:


		December 31,
		2020			2019
Beginning balance at January 1,		$	786		$	—
Issuance of derivative			382			2,673
Change in fair value			(1,168)			(1,887)
Ending balance at December 31,		$	—		$	786

Star Peak Energy Transition Corp [Member]

Fair Value Measurements

Note 7—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 as of March 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.


		Fair Value Measured as of March 31,2021
		Level 1			Level 2			Level 3			Total
Assets
Investments held in Trust Account - U.S. Treasury Securities		$	383,585,733		$	—		$	—		$	383,585,733
Liabilities:
Warrant liabilities - public warrants			171,878,063			—			—			171,878,063
Warrant liabilities - private warrants			—			—			104,995,656			104,995,656
Total fair value		$	555,463,796		$	—		$	104,995,656		$	660,459,452

The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2020 by level within the fair value hierarchy:


		Fair Value Measured as of December 31, 2020
		Level 1			Level 2			Level 3			Total
Assets
Investments held in Trust Account - U.S. Treasury Securities		$	383,721,747		$	—		$	—		$	383,721,747
Liabilities:
Warrant liabilities - public warrants			64,339,997			—			—			64,339,997
Warrant liabilities - private warrants			—			—			56,751,981			56,751,981
Total fair value		$	448,061,744		$	—		$	56,751,981		$	504,813,725

Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period. There were no transfers between levels for the three months ended March 31, 2021.

The fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of the warrants issued in connection with the Public Offering were initially measured at fair value using a Monte Carlo simulation model and subsequently measured based on the listed market price of such warrants. The Company estimate the fair value of the warrants at each reporting period, with changes in fair value recognized in the statements of operations. For the three months ended March 31, 2021, the Company recognized a charge from an increase in the fair value of liabilities of approximately $155.8 million presented as change in fair value of derivative warrant liabilities on the accompanying statements of operations.

The change in the fair value of the derivative warrant liabilities for three months ended March 31, 2021 is summarized as follows:


Warrant liabilities at December 31, 2020		$	121,091,978
Change in fair value of warrant liabilities			155,781,741
Warrant liabilities at March 31, 2021		$	276,873,719

The estimated fair value of the derivative warrant liabilities is determined using Level 3 inputs. Inherent in a Monte-Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate, dividend yield, probability of completing a Business Combination and discount for lack of marketability. The Company estimates the volatility of its common stock based on historical volatility of select peer companies 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 remaining at zero. The Company estimates the probability of completing a Business Combination to be 95.0% based on its proposed business combination.

The following table provides quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:


		As of March 31, 2021
Exercise price		$	11.50
Stock Price		$	20.58
Term (in years)			5.09
Volatility			15.00	%
Risk-free interest rate			0.94	%
Dividend yield			—
Probability of completing a Business Combination			95.00	%
Discount for lack of marketability			1.5	%

Note 8 — Fair Value Measurements

The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of December 31, 2020 by level within the fair value hierarchy:


		Fair Value Measured as of December 31, 2020
		Level 1			Level 2			Level 3			Total
Assets
Investments held in Trust Account - U.S. Treasury Securities		$	383,721,747		$	—		$	—		$	383,721,747
Liabilities:
Stock warrant liabilities (restated)			—			—			121,091,978			121,091,978
Total fair value		$	383,721,747		$	—		$	121,091,978		$	504,813,725

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers between levels for the year ended December 31, 2020.

The Company utilizes a binomial Monte-Carlo simulation to estimate the fair value of the warrants at each reporting period, with changes in fair value recognized in the statement of operations. The Company recorded $11,822,148 for the derivative warrant liabilities upon their issuance on August 20, 2020. For the year ended December 31, 2020, the Company recognized a charge to the statement of operations resulting from an increase in the fair value of liabilities of $109,269,830 presented as change in fair value of derivative warrant liabilities on the accompanying statement of operations.

The change in the fair value of the derivative warrant liabilities for the year ended December 31, 2020 is summarized as follows:


Warrant liabilities at January 1, 2020		$	—
Issuance of Public and Private Warrants			11,822,148
Warrant liabilities at September 30, 2020		$	11,822,148
Change in fair value of warrant liabilibites			109,269,830
Warrant liabilities at December 31, 2020		$	121,091,978

The estimated fair value of the derivative warrant liabilities is determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility of select peer companies 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 remaining at zero.

The following table provides quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:


		As of December 31,			As of August 20, 2020 and
		2020			September 30, 2020
Exercise price		$	11.50		$	11.50
Stock price		$	20.46		$	9.90
Term (in years)			5.33			5.58
Volatility			21.00	%		21.50	%
Risk-free interest rate			0.41	%		0.34	%
Dividend yield			—			—
Probability of completing a Business Combination			85.00	%		50.00	%
Discount for lack of marketability			3.00	%		4.00	%

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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