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WARRANTS | 3 Months Ended
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Mar. 31, 2025
Other Liabilities Disclosure [Abstract] |
WARRANTS | WARRANTS Penny Warrants On February 14, 2023, the lenders under the Amended Credit Agreement (see Note 10 for additional information) received warrants (the “Penny Warrants”) to purchase 3,223,851 shares of Altisource common stock (the “Penny Warrant Shares”). The number of Penny Warrant Shares was subject to reduction based on the amount of Aggregate Paydowns. During 2023, the Company made $30 million of Aggregate Paydowns. Since Aggregate Paydowns were equal to or greater than $30 million, the number of Penny Warrant Shares was reduced to 1,612,705. The following table summarizes the activity related to our Penny Warrant Shares:
| Penny Warrant Shares
Outstanding as of December 31, 2023 | 1,612,705 |
Exercised | (96,841) |
Outstanding as of December 31, 2024 | 1,515,864 |
Exercised | (1,515,864) |
Outstanding as of March 31, 2025 | — |
The exercise price per share of common stock under each Penny Warrant is equal to $0.01. As of March 31, 2025, no Penny Warrant Shares remain outstanding. Stakeholder Warrants On April 3, 2025, the Company distributed 70.5 million warrants to purchase approximately 114.5 million shares of Altisource common stock for $1.20 per share (the “Stakeholder Warrants”). The distribution of Stakeholder Warrants was contingent upon, among other things, approval of the distribution by the Company’s shareholders and the consummation of the Debt Exchange Transaction (such conditions, collectively, the “Distribution Conditions”). The Distribution Conditions were satisfied during the quarter ended March 31, 2025. Fifty percent of the Stakeholder Warrants will expire on April 2, 2029 and require settlement through the cash payment to the Company of the exercise price of such Stakeholder Warrant (“Cash Exercise Stakeholder Warrants”). Fifty percent of the Stakeholder Warrants will expire on April 30, 2032 and require settlement through the forfeiture of shares of common stock to the Company equal to the exercise price of such Stakeholder Warrants (“Net Exercise Stakeholder Warrants”). Each Cash Exercise Stakeholder Warrant is exercisable for 1.625 shares of our common stock (“Cash Exercise Stakeholder Warrant Shares). Each Net Settle Stakeholder Warrant is exercisable for 1.625 shares of our common stock (“Net Exercise Stakeholder Warrant Shares”). The Stakeholder Warrants are exercisable on the later of (i) 90 days after their issuance and (ii) first date on which the VWAP (as defined in the Warrant Agent Agreement for the Stakeholder Warrants (the “Warrant Agent Agreement”)) of the common stock equals or exceeds the Implied Per Share Exercise Price (as such term is defined in the Warrant Agent Agreement) of the Stakeholder Warrants, which is initially $1.20, for a period of fifteen consecutive trading days (the “VWAP Condition”). The exercise price of the Stakeholder Warrants is $1.95 per Stakeholder Warrant. The fair values of the Cash Exercise Stakeholder Warrants and the Net Exercise Stakeholder Warrants were determined using the Black-Scholes option pricing model. The following table summarizes the fair value of the Stakeholder Warrants and the assumptions used to determine the fair value:
|  | Cash Exercise Stakeholder Warrants |  | Net Exercise Stakeholder Warrants
Risk-free interest rate (%) |  | 4.29 | % |  | 4.42 | %
Expected stock price volatility (%) |  | 57.50 | % |  | 57.50 | %
Expected dividend yield |  | 0.00 | % |  | 0.00 | %
Expected option life (in years) |  | 4.12 |  | 7.19
Fair value per Stakeholder Warrant |  | $0.47 |  | $0.68
The Stakeholder Warrants are indexed to Altisource’s stock and are classified as equity under ASC 815, resulting in a $40.5 million increase in Additional paid-in capital. The distribution of the Stakeholder Warrants are non-reciprocal pro rata distributions and are accounted for as a dividend. Because the Company has negative retained earnings, the Company recorded the dividend as a $40.5 million reduction to Additional paid-in capital. Since the transaction is accounted for as both an increase and a decrease in Additional paid-in capital, the net result is zero and is not reflected in the Condensed Consolidated Statements of Equity (Deficit). The following table summarizes outstanding Stakeholder Warrants and Stakeholder Warrant Shares following the distribution:
Cash Exercise Stakeholder Warrants |  | Cash Exercise Stakeholder Warrant Shares |  | Net Exercise Stakeholder Warrants |  | Net Exercise Stakeholder Warrant Shares |  | Total Stakeholder Warrants |  | Total Stakeholder Warrant Shares
35,230,503 |  |  | 57,249,567 |  |  | 35,230,503 |  |  | 57,249,567 |  |  | 70,461,006 |  |  | 114,499,134 |

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