ProCap Financial, Inc. Fair Value Disclosure
Note 11. Fair Value Measurements
The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of December 31, 2025:
| Fair value measured at December 31, 2025 | ||||||||||||||||
Total fair value at December 31, 2025 | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Digital assets | $ | 441,791,316 | $ | 441,791,316 | $ | $ | ||||||||||
| Liabilities: | ||||||||||||||||
| Derivative securities liabilities | $ | 428,236 | $ | $ | $ | 428,236 | ||||||||||
| Conversion feature liability - convertible notes | $ | 2,278,940 | $ | $ | $ | 2,278,940 | ||||||||||
Digital Assets
In determining the fair value of its Bitcoin investments, the Company uses quoted prices as determined by utilizing Coinbase closing prices at midnight UTC. As such, the Company’s digital assets were determined to be Level 1 assets.
Conversion Feature Liability - Convertible Notes
In determining the fair value of Conversion Feature Liability, the Company utilized the Black-Scholes pricing model which is considered to be Level 3 liability. The key inputs are presented in the table below:
As of December 5, 2025 (Initial) | As of December 31, 2025 | |||||||
| Strike price | $ | 13.00 | $ | 13.00 | ||||
| Stock price | $ | 4.36 | $ | 3.53 | ||||
| Volatility | 45.0 | % | 45.0 | % | ||||
| Remaining term (in years) | 3.00 | 3.00 | ||||||
| Risk-free rate | 3.53 | % | 3.49 | % | ||||
The following table presents a roll-forward of the Convertible Note Conversion Feature Liability for the period from June 17, 2025 (inception) through December 31, 2025
| Conversion feature | ||||
| liability - convertible notes | ||||
| As of June 17, 2025 (inception) | $ | |||
| Initial value at December 5, 2025 | 4,629,230 | |||
| Change in fair value | (2,350,290 | ) | ||
| Balance at December 31, 2025 | $ | 2,278,940 | ||
Derivative Liability - Preferred Units
In determining the fair value of the Derivative Liability - Preferred Units, the Company utilized the Black-Scholes pricing model which is considered to be a Level 3 liability. The key inputs are presented in the table below:
As of June 23, 2025 (Initial) | ||||
| Strike price - Preferred unit | $ | 11.94 | ||
| Stock price | $ | 10.79 | ||
| Volatility | 47.6 | % | ||
| Remaining term (in years) | 0.5 | |||
| Risk-free rate | 4.29 | % | ||
The following table presents a roll-forward of the Derivative Liability – Preferred Units for the period from June 17, 2025 (inception) through December 31, 2025:
| Preferred Units | ||||
| Derivative Liability | ||||
| As of June 17, 2025 (inception) | $ | |||
| Initial value as of June 23, 2025 | 56,298,500 | |||
| Settlement of Derivative | (56,298,500 | ) | ||
| Balance at December 31, 2025 | $ | |||
Derivative Securities Liabilities
When quoted market prices are not available, fair value is determined using a market-participant-based option pricing model. The Company utilizes a Black-76 valuation model to determine the fair value of BTC put options leveraging calibrated Bitcoin forward curves and volatility surfaces daily at 4:00 PM ET using executable bid-offer prices and futures data sourced from Deribit. These calibrated inputs are applied across option strikes and maturities to derive fair-market pricing.
The following table presents a roll-forward of the derivative securities liability for the period from June 17, 2025 (inception) through December 31, 2025:
| Fair value | ||||
| As of June 17, 2025 (inception) | $ | |||
| Premiums received on sold BTC put options | 534,500 | |||
| Net change in fair value recognized in earnings | (106,264 | ) | ||
| Settlements / expirations | ||||
| Fair value as of December 31, 2025 | $ | 428,236 | ||
See Note 3 above for a description of the Company’s accounting policies.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.