BlackSky Technology Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair value measurements

Fair value measurements

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair value measurements

NOTE 10—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 the Company’s 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 that are measured at fair value on a recurring basis at June 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:


Description	Level		June 30, 2021		December 31, 2020
Assets:
Marketable securities held in Trust Account		1	$	317,984,713	$	318,041,728
Liabilities:
Warrant Liability – Public Warrants		1		27,039,375		23,244,375
Warrant Liability – Private Placement Warrants		3		20,313,000		12,487,500

The Warrants were accounted for as liabilities in accordance with

ASC 815-40 and

are presented within warrant liabilities on our condensed consolidated balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the consolidated statements of operations.

The Private Placement and Public Warrants were initially valued using a Binomial Lattice Model, which is considered to be a Level 3 fair value measurement. The Binomial Lattice Model’s primary unobservable input utilized in determining the fair value of the Public and Private Placement Warrants is the expected volatility of the common stock. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s own public warrant pricing. A Binomial Lattice Model was used in estimating the fair value of the Public Warrants for periods where no observable trading price was available, using the same expected volatility as was used in measuring the fair value of the Private Placement Warrants. For periods subsequent to the detachment of the warrants from the Units, the closing price of the Public Warrants was used as the fair value as of each relevant date.

The key inputs into the Binomial Lattice Model for the initial measurement of Public Warrants and Private Placement Warrants and subsequent measurement of the Private Placement Warrants are as follows:


Input	June 30, 2021			December 31, 2020
Risk-free interest rate		0.86	%		0.38	%
Market price of public stock	$	9.99		$	10.47
Dividend Yield		0.00	%		0.00	%
Implied volatility		32.8	%		21.8	%
Exercise price	$	11.50		$	11.50

On December 31, 2020, the Private Placement Warrants and Public Warrants were determined to be valued at $1.50 and $1.47 per warrant for aggregate values of $12.5 million and $23.2 million, respectively. On June 30, 2021, the Private Placement Warrants and Public Warrants were determined to be valued at $2.44 and $1.71 per warrant for aggregate values of $20.3 million and $27.0 million, respectively.

The following table presents the changes in the fair value of warrant liabilities:


For the six month-period ended June 30, 2021	Private Placement		Public		Warrant Liabilities
Fair value as of January 1, 2021	$	12,487,500	$	23,244,375	$	35,731,875
Change in fair value of warrant liability		7,242,750		3,478,750		10,721,500

Fair value as of March 31, 2021	$	19,730,250	$	26,723,125	$	46,453,375

Change in fair value of warrant liability		582,750		316,250		899,000

Fair value as of June 30, 2021	$	20,313,000	$	27,039,375	$	47,352,375


For the six month-period ended June 30, 2020	Private Placement			Public			Warrant Liabilities
Fair value as of January 1, 2020	$	7,575,750		$	14,231,250		$	21,807,000
Change in fair value of warrant liability		(1,914,750	)		(3,478,750	)		(3,620,625	)

Fair value as of March 31, 2020	$	5,661,000		$	10,752,500		$	16,413,500

Change in fair value of warrant liability		(3,1630,50	)		(5,850,625	)		(5,393,500	)

Fair value as of June 30, 2020	$	8,824,500		$	16,603,125		$	25,427,625

During the three and six month periods ended June 30, 2021 and 2020, respectively, there were no transfers out of Level 3.

- 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.

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