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FAIR VALUE MEASUREMENTS | 12 Months Ended
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Dec. 31, 2020
FAIR VALUE MEASUREMENTS |
FAIR VALUE MEASUREMENTS | NOTE 11. FAIR VALUE MEASUREMENTS The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities: Level 1:Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2:Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3:Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2020 and 2019, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|  |  |  | December 31, |  | December 31,
Description |  | Level |  | 2020 |  | 2019
Assets: |  |  |  |  |  |  |  |
Cash and marketable securities held in Trust Account |  | 1 |  | $ | 696,957,196 |  | $ | 695,295,418
Liabilities: Warrant Liabilities – Public Warrants |  | 1 |  |  | 45,310,000 |  |  | 32,660,000
Warrant Liabilities – Private Placement Warrants |  | 3 |  |  | 32,548,000 |  |  | 23,700,000
Prosus Agreement liability |  | 3 |  |  | 50,481,190 |  |  | —
Conversion option liability |  | 3 |  |  | 1,604,359 |  |  | —
The Derivative Instruments were accounted for as liabilities in accordance with ASC 815‑40 and are measured at fair value at inception and on a recurring basis, with changes in fair value recorded in the statement of operations. The Warrants were valued as of July 1, 2019 using a Monte Carlo simulation, which is considered to be a Level 3 fair value measurement. The Monte Carlo simulation’s primary unobservable input utilized in determining the fair value of the Warrants is the probability of consummation of the Business Combination. The probability assigned to the consummation of the Business Combination was 80% which was estimated based on the observed success rates of business combinations for special purpose acquisition companies. The expected volatility as of the Initial Public Offering date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units is classified as Level 1 due to the use of an observable market quote in an active market under the ticker CVII.WS. As of December 31, 2019 and December 31, 2020, the estimated fair value of Warrant Liability – Private Placement Warrants were determined using a Black-Scholes valuation and based on the following significant inputs:
|  | As of December 31, |  | As of December 31, |
|  | 2019 |  | 2020 |
Exercise price |  | $ | 11.50 |  | $ | 11.50 |
Stock price |  | $ | 10.44 |  | $ | 10.35 |
Volatility |  |  | 20.00 | % |  | 30.0 | %
Probability of completing a Business Combination |  |  | 80.0 | % |  | 85 | %
Term |  |  | 5.33 |  |  | 5.11 |
Risk-free rate |  |  | 1.74 | % |  | 0.38 | %
Dividend yield |  |  | 0.0 | % |  | 0.0 | %
At inception, the Prosus Agreement Liability consisted of two components: a commitment for the First Step Investment and a call option for the Second Step Investment. Subsequent to Prosus exercising its call option, the Prosus Agreement Liability represented a commitment. The commitment and call option were valued using forward contract valuation methodology and a Black Scholes model, respectively. Both valuation methodologies were considered to be Level 3 fair value measurements. As of December 31, 2020 the Option had been exercised and the First Step Investment commitment was valued using a forward contract valuation methodology. As of inception and December 31, 2020, the estimated fair value of Prosus Agreement Liability was determined based on the following significant inputs:
|  | As of October 12, |  | As of December 31, |
|  | 2020 |  | 2020 |
Exercise price |  | $ | *400.0 | M | $ | 500.0 | M
Underlying value |  | $ | 436.8 | M | $ | 550.3 | M
Volatility |  |  | 40 | % |  | N/A |
Term |  |  | 0.08 |  |  | 0.33 |
Risk-free rate |  |  | 0.10 | % |  | 0.09 | %
Dividend yield |  |  | 0.00 | % |  | 0.00 | %
(*) M is defined as million. The Conversion option liability was valued using a Black Scholes model, which was considered to be a Level 3 fair value measurement. At inception and December 31, 2020, the estimated fair value of Conversion option liability was determined based on the following significant inputs:
|  | As of November 2, |  | As of December 31, |
|  | 2020 |  | 2020 |
Exercise price |  | $ | 1.00 |  | $ | 1.00 |
Underlying warrant value |  | $ | 1.92 | * | $ | 2.06 | *
Volatility |  |  | 125.0 | % |  | 110.0 | %
Number of Class A Shares |  |  | *1.5 | M |  | 1.5 | M
Term |  |  | 0.28 |  |  | 0.11 |
Risk-free rate |  |  | 0.09 | % |  | 0.08 | %
Dividend yield |  |  | 0.0 | % |  | 0.0 | %
(*) M is defined as million. *The underlying warrant value equals the calculated fair value of the private placement warrants as of each date presented and determined based on the following significant inputs:
|  | As of November 2, |  | As of December 31, |
|  | 2020 |  | 2020 |
Exercise price |  | $ | 11.50 |  | $ | 11.50 |
Stock price |  | $ | 9.97 |  | $ | 10.35 |
Volatility |  |  | 30.0 | % |  | 30.0 | %
Probability of completing a Business Combination |  |  | 85.0 | % |  | 85.0 | %
Term |  |  | 5.28 |  |  | 5.11 |
Risk-free rate |  |  | 0.41 | % |  | 0.38 | %
Dividend yield |  |  | 0.0 | % |  | 0.0 | %
The following table presents the changes in the fair value of warrant liabilities:
|  |  |  |  |  |  |  | Warrant
|  | Private Placement |  | Public |  | Liabilities
Fair value as of April 11, 2019 (inception) |  | $ | — |  | $ | — |  | $ | —
Initial measurement on July 1, 2019 |  |  | 15,800,000 |  |  | 22,310,000 |  |  | 38,110,000
Change in valuation inputs or other assumptions |  |  | 7,900,000 |  |  | 10,350,000 |  |  | 18,250,000
Fair value as of December 31, 2019 |  |  | 23,700,000 |  |  | 32,660,000 |  |  | 56,360,000
Change in valuation inputs and other assumptions |  |  | 8,848,000 |  |  | 12,650,000 |  |  | 21,498,000
Fair value as of December 31, 2020 |  | $ | 32,548,000 |  | $ | 45,310,000 |  | $ | 77,858,000
The following table presents the change in the fair value of the Prosus Agreement liability:
Fair value as of January 1, 2020 |  | $ | —
Initial measurement on October 12, 2020 |  |  | 45,045,478
Change in valuation inputs and other assumptions |  |  | 5,432,712
Fair value as of December 31, 2020 |  | $ | 50,481,190
The following table presents the change in the fair value of conversion option:
Fair value as of January 1, 2020 |  | $ | —
Initial measurement on November 2, 2020 |  |  | 1,493,877
Change in valuation inputs and other assumptions |  |  | 110,482
Fair value as of December 31, 2020 |  | $ | 1,604,359

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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