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Fair Value Measurements
 3 Months Ended
Mar. 31, 2025
Fair Value Measurements [Abstract]  
Fair Value Measurements

4. Fair Value Measurements

 

Overview

 

ASC 820 defines fair value, establishes a framework for measuring fair value as well as a hierarchy of fair value inputs. Refer to the below as well as Note 2 – Summary of Significant Accounting Policies in the Company’s 2024 Form 10-K for further information regarding fair value hierarchy, valuation techniques and other items related to fair value measurements.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

The tables below present, by level within the fair value hierarchy, financial assets and liabilities, measured at fair value on a recurring basis for the periods indicated. As required by ASC Topic 820, financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the respective fair value measurement.

 

   As of March 31, 2025 
   Level 1   Level 2   Level 3   Total 
Assets                
Cash and securities segregated for regulatory purposes                
U.S. government securities  $44,369,000   $
—
   $
—
   $44,369,000 
                     
Securities owned, at fair value                    
U.S. government securities  $17,271,000   $
—
   $
—
   $17,271,000 
Certificates of deposit   
—
    141,000    
—
    141,000 
Municipal securities   
—
    117,000    
—
    117,000 
Corporate bonds   
—
    16,000    
—
    16,000 
Unit investment trust   
—
    229,000    
—
    229,000 
Options   1,000    
—
    
—
    1,000 
Equity securities   667,000    89,000    10,833,000    11,589,000 
Total Securities owned, at fair value  $17,939,000   $592,000   $10,833,000   $29,364,000 
                     
Liabilities                    
Securities sold, not yet purchased, at fair value                    
Equity securities  $78,000   $
—
   $
—
   $78,000 
Options   64,000    
—
    
—
    64,000 
Total Securities sold, not yet purchased, at fair value  $142,000   $
—
   $
—
   $142,000 

 

   As of December 31, 2024 
    Level 1    Level 2    Level 3     Total 
Assets                
Cash and securities segregated for regulatory purposes                
U.S. government securities  $ 68,758,000   $
—
   $
—
   $ 68,758,000 
                     
Securities owned, at fair value                    
U.S. government securities  $20,086,000   $
—
   $
—
   $20,086,000 
Certificates of deposit   
—
    112,000    
—
    112,000 
Corporate bonds   
—
    2,000    
—
    2,000 
Options   58,000    
—
    
—
    58,000 
Equity securities   1,055,000    72,000    
—
    1,127,000 
Total Securities owned, at fair value  $21,199,000   $186,000   $
—
   $21,385,000 
                     
Liabilities                    
Securities sold, not yet purchased, at fair value                    
Equity securities  $1,000   $
—
   $
—
   $1,000 
Options   25,000              25,000 
Total Securities sold, not yet purchased, at fair value  $26,000   $
—
   $
—
   $26,000 

The Company had U.S. government securities with the market values and maturity dates for the periods indicated below.

 

   As of
March 31,
2025		 
Maturing in 2025  $48,367,000 
Maturing in 2026   13,063,000 
Accrued interest   210,000 
Total Market value  $61,640,000 

 

    As of
December 31,
2024		 
Maturing in 2025  $80,739,000 
Maturing in 2026   8,019,000 
Accrued interest   86,000 
Total Market value  $88,844,000 

 

Level 3 Instrument

 

The Company valued the Investment in Equity Security using a Finnerty option-pricing model. A 45-day expected holding period and 120% expected volatility yielded approximately a 40% discount for a lack of marketability which reflects market-participant pricing for the typical reversion of IPOs with 500% day-one gains, meme-stock volatility premiums, and the issuer’s outstanding high-stakes litigation.

 

The following table provides a reconciliation of our Level 3 assets, which are valued using significant unobservable inputs. These assets are measured at fair value based on internally developed models, with adjustments reflecting market conditions and management’s best estimates. There were no transfers in or out of Level 3 assets for the three months ended March 31, 2025. The table below outlines changes in Level 3 assets for the reporting period, including purchases, sales, and unrealized gains or losses:

 

   As of and for the Three Months Ended March 31, 2025 
Category  Opening
Balance		   Purchases   Sales   Transfers
In / Out		   Unrealized
Gains / (Losses)		   Closing
Balance		 
Equity Security Investment  $
—
   $1,600,000   $
—
   $
—
   $9,233,000   $10,833,000 

 

For the three months ended March 31, 2025, the Company recorded an unrealized gain of approximately $9.2 million in relation to the Investment in Equity Security. However, due to the volatility of the price of the shares, which has declined significantly since March 31, 2025, management is uncertain as to the total unrealized or realized gain or loss that will be recognized from the Investment in Equity Security. Solely for illustrative purposes, on May 7, 2025, the closing share price of the Investment in Equity Security fell to $25.24 per share, compared with $83.51 per share ($50.11 per share after the 40% discount) as of March 31, 2025. Had the Company sold its shares on May 7, 2025, the total gain would have been approximately $3.9 million, instead of the $9.2 million unrealized gain recognized during the three months ended March 31, 2025. Because the decline reflects conditions arising after March 31, 2025, no adjustment has been made to the accompanying financial statements. The potential change in the market value of the Investment in Equity Security may materially impact the results of future periods.

Financial Assets and Liabilities Not Carried at Fair Value

 

Financial assets and liabilities not measured at fair value are recorded at carrying value, which approximates fair value either due to their short-term nature, or in the case of long-term assets or liabilities, management has determined the difference in the carrying value and fair value is immaterial. The tables below represents financial instruments in which the ending balances as of March 31, 2025 and December 31, 2024 are not carried at fair value in the statements of financial condition:

 

   As of March 31, 2025 
   Carrying Value   Fair Value   Level 1   Level 2   Level 3 
Financial assets, not measured at fair value                    
Cash and cash equivalents  $25,713,000   $25,713,000   $25,713,000   $
—
   $
—
 
Cash – segregated for regulatory purposes   107,079,000    107,079,000    107,079,000    
—
    
—
 
Securities borrowed   207,591,000    207,591,000    
—
    207,591,000    
—
 
Receivables from customers   79,576,000    79,576,000    
—
    79,576,000    
—
 
Receivables from non-customers   802,000    802,000    
—
    802,000    
—
 
Receivables from broker-dealers and clearing organizations   4,771,000    4,771,000    
—
    4,771,000    
—
 
Other receivables   2,904,000    2,904,000    
—
    2,904,000    
—
 
Deposits with broker-dealers and clearing organizations   5,599,000    5,599,000    
—
    5,599,000    
—
 
Total financial assets, not measured at fair value  $434,035,000   $434,035,000   $132,792,000   $301,243,000   $
—
 
                          
Financial liabilities, not measured at fair value                         
Securities loaned  $210,688,000   $210,688,000   $
—
   $210,688,000   $
—
 
Payables to customers   206,922,000    206,922,000    
—
    206,922,000    
—
 
Payables to non-customers   2,656,000    2,656,000    
—
    2,656,000    
—
 
Drafts payable   1,055,000    1,055,000    
—
    1,055,000    
—
 
Payables to broker-dealers and clearing organizations   1,291,000    1,291,000    
—
    1,291,000    
—
 
Deferred contract incentive   283,000    283,000    
—
    283,000    
—
 
Long-term debt   4,205,000    4,205,000    
—
    4,205,000    
—
 
Contract termination liability   2,114,000    2,114,000    
—
    2,114,000    
—
 
Total financial liabilities, not measured at fair value  $429,214,000   $429,214,000   $
—
   $429,214,000   $
—
 

 

   As of December 31, 2024 
   Carrying Value   Fair Value   Level 1   Level 2   Level 3 
Financial assets, not measured at fair value                    
Cash and cash equivalents  $32,629,000   $32,629,000   $32,629,000   $
—
   $
—
 
Cash – segregated for regulatory purposes   135,829,000    135,829,000    135,829,000    
—
    
—
 
Securities borrowed   139,040,000    139,040,000    
—
    139,040,000    
—
 
Receivables from customers   84,367,000    84,367,000    
—
    84,367,000    
—
 
Receivables from non-customers   607,000    607,000    
—
    607,000    
—
 
Receivables from broker-dealers and clearing organizations   3,920,000    3,920,000    
—
    3,920,000    
—
 
Other receivables   2,744,000    2,744,000    
—
    2,744,000    
—
 
Deposits with broker-dealers and clearing organizations   4,227,000    4,227,000    
—
    4,227,000    
—
 
Total financial assets, not measured at fair value  $403,363,000   $403,363,000   $168,458,000   $234,905,000   $
—
 
                          
Financial liabilities, not measured at fair value                         
Securities loaned  $184,962,000   $184,962,000   $
—
   $184,962,000   $
—
 
Payables to customers   227,129,000    227,129,000    
—
    227,129,000    
—
 
Payables to non-customers    3,297,000    3,297,000    
—
    3,297,000    
—
 
Drafts payable   1,331,000    1,331,000    
—
    1,331,000    
—
 
Payables to broker-dealers and clearing organizations    444,000    444,000    
—
    444,000    
—
 
Deferred contract incentive   496,000    496,000    
—
    496,000    
—
 
Long-term debt    4,228,000    4,228,000    
—
    4,228,000    
—
 
Contract termination liability   2,567,000    2,567,000    
—
    2,567,000    
—
 
Total financial liabilities, not measured at fair value  $424,454,000   $424,454,000   $
—
   $424,454,000   $
—