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Debt
 3 Months Ended
Mar. 31, 2025
Debt Disclosure [Abstract]  
Debt
(7) Debt
Convertible Note
On August 7, 2023, the Company entered into an investment agreement with Oakstone, an affiliate of Capital One, relating to the sale and issuance to Oakstone of the Note due in 2028 in a principal amount of $25.0 million. On September 29, 2023, the Company issued the Note. The total net proceeds from this offering were $23.1 million, after deducting $1.9 million of debt issuance costs.
The Note is an unsubordinated secured obligation of the Company. The Note is secured by a first priority security interest in substantially all of Inspirato Incorporated’s and its domestic subsidiaries’ assets. The Note is fully and unconditionally guaranteed by certain existing and future domestic subsidiaries of the Company. The Note bears interest at a fixed rate of 8% per annum. Interest on the Note is due quarterly on the last business day of each calendar quarter following the issuance of the Note and the Company has elected to pay interest in kind by increasing the outstanding principal amount of the Note by the amount of interest payable on such interest payment date. As of March 31, 2025 and December 31, 2024, the outstanding amount of the Note was $28.2 million and $27.6 million, respectively.
The current conversion price of the Note is $30 per share, which has been adjusted for the September 26, 2023 reverse stock split, and continues to be subject to customary adjustments upon additional certain extraordinary events, including any dividend of Company securities or other property, stock split, stock combination, reclassification, consolidation, merger or a sale of all or substantially all of the Company’s assets.
The Note is convertible at the option of the holder into shares of Class A Common Stock. However, to the extent that the conversion of the Note would result in any holder subject to certain regulations under the Bank Holding Company Act of 1956 (the “BHC Act”) owning or controlling greater than 4.99% of the voting power of any “class” of “voting securities” of the Company for purposes of the BHC Act (the “Voting Threshold”), then the Note would first convert into Class A Common Stock up to the Voting Threshold, and the excess would convert into shares of the Company’s Class B Common Stock, which are generally identical to the Class A Common Stock except that the Class B Common Stock is not entitled to vote on any matters submitted to the Company’s stockholders other than certain enumerated actions or as otherwise required by law. To the extent that the conversion of the Note would result in any holder subject to certain regulations under the BHC Act owning or controlling greater than 24.99% of the sum of the number of issued and outstanding shares of Class A Common Stock and Class B Common Stock (the “Ownership Threshold”), then the Note would convert into the maximum number of Class A Common Stock and Class B Common Stock allowable by the Voting Threshold and the Ownership Threshold, and the excess would remain outstanding and become convertible only when conversion would not cause the holder to exceed the Voting Threshold and Ownership Threshold. The Note is convertible in whole or in part at the option of Oakstone at any time subject to restrictions as dictated by the BHC Act.
On or after the three-year anniversary of the Closing, the Note will be redeemable (subject to certain terms and conditions) by the Company in whole (but not in part) at a redemption price equal to the fair market value of the Class A Common Stock issuable upon conversion of the then-outstanding principal amount of the Note. The Note and the associated commercial agreement, as defined below, also include a minimum liquidity threshold of $10 million. On March 21, 2025, the Company entered into a twelve month Agreement with Oakstone (an affiliate of Capital One), the holder of the Note. Pursuant to the Agreement, Oakstone agreed to forbear from exercising its contractual right under the Note to require redemption in the event the Company fails to meet the minimum liquidity threshold (as defined in the related commercial
agreements) during the forbearance period. The Agreement is intended to provide the Company with increased operational flexibility as it continues to pursue long-term strategic initiatives. All other terms of the Note remain unchanged.
Upon a change of control of the Company, the termination of the commercial agreement between Inspirato LLC and an affiliate of the Oakstone executed pursuant to the investment agreement (“Commercial Agreement”) by the Company or the termination of the Commercial Agreement by Capital One due to the Company’s material breach, Oakstone may require the Company to repurchase all or any part of its Note at a cash price equal to the greater of (i) 1.5 times the then-outstanding principal amount and accrued and unpaid interest thereon or (ii) the then-fair market value of the shares issuable upon conversion of the portion of the Note to be repurchased. Upon an Event of Default, Oakstone may declare the principal of, and all accrued and unpaid interest under, to be due and payable on the Note immediately.
The Note and the documents governing the security interest granted to secure the Note include customary affirmative and negative covenants. The affirmative covenants include, among other things, payment of principal and interest when due, delivery of compliance certificates and notices, maintenance of existence and guarantee obligations. The negative covenants include, among other things, limitations on mergers, consolidations, acquisitions, the incurrence of liens (subject to certain exceptions) and the sale, lease or transfer of all or substantially all of the Company’s assets.
The Company has elected to carry the Note at fair value, with changes in its value recognized as fair value gains or losses within the Condensed Consolidated Statements of Operations and Comprehensive Income. Fair value gains of $0.5 million and $4.2 million for the three months ended March 31, 2025 and 2024, respectively, were recorded in gain on fair value instruments within the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income.
Interest, Net
The Company incurred net interest expense of $0.5 million and $0.3 million for the three months ended March 31, 2025 and 2024, respectively, which has been recognized to interest expense, net within the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income. The Company incurred interest expense on the Note of $0.6 million and $0.5 million during the three months ended March 31, 2025 and 2024, respectively. The interest expense was offset by interest income from the Company’s banking relationship of $0.1 million and $0.2 million for the three months ended March 31, 2025 and 2024, respectively.