FAIR VALUE MEASUREMENTS
|3 Months Ended
Mar. 31, 2021
|FAIR VALUE MEASUREMENTS
|FAIR VALUE MEASUREMENTS
5. FAIR VALUE MEASUREMENTS
The Company uses the following three-tier fair value hierarchy, which prioritizes the inputs used in measuring the fair values for certain of its assets and liabilities:
Level 1 is based on observable inputs, such as quoted prices in active markets;
Level 2 is based on inputs other than the quoted prices in active markets that are observable either directly or indirectly; and
Level 3 is based on unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Items measured at fair value on a recurring basis include money market funds.
The following fair value hierarchy table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the inputs the Company utilized to determine such fair value (in thousands):
The Company has determined that the estimated fair value of its corporate bonds and commercial paper are reported as Level 2 financial assets as they are based on model-driven valuations in which all significant inputs are observable, or can be derived from or corroborated by observable market data for substantially the full term of the asset.
The other investment is reported as a Level 3 financial asset because the methodology used to develop the estimated fair value includes significant unobservable inputs reflecting management’s own assumptions, including the rights and obligations of the securities the Company holds as well as the probability of a qualified financing event, acquisition, or change in control.
The fair value of the Private Placement Warrants is estimated using the Black-Scholes option pricing model and is classified as a Level 3 financial instrument. The significant assumptions used in the model were the Company’s stock price, exercise price, expected term, volatility, interest rate, and dividend yield.
There were no transfers between fair value measure levels during the three months ended March 31, 2021 and 2020. The following table presents information about the Company’s movement in Level 3 assets measured at fair value (in thousands):
The following table presents information about the Company’s movement in Level 3 liabilities measured at fair value (in thousands):