MP Materials Corp. / DEMP
MP Materials Corp. / DE Fair Value Disclosure
FAIR VALUE MEASUREMENTS
ASC Topic 820, “Fair Value Measurement,” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
| Level 1: | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; | ||||
| Level 2: | Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, quoted prices or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability and model-based valuation techniques (e.g., the Black-Scholes model) for which all significant inputs are observable in active markets; | ||||
| Level 3: | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). | ||||
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy. The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate. The fair value of the Company’s accounts receivable, accounts payable, and accrued liabilities approximates their respective carrying amounts because of the immediate or short-term maturity of these financial instruments.
Cash, Cash Equivalents and Restricted Cash
The fair value of the Company’s cash, cash equivalents and restricted cash is classified within Level 1 of the fair value hierarchy. The carrying amounts reported in the Consolidated Balance Sheets approximate the fair value of cash, cash equivalents and restricted cash due to the short-term nature of these assets.
Short-term Investments
The fair value of the Company’s short-term investments, which are classified as available-for-sale securities, is estimated based on quoted prices in active markets and is classified as a Level 1 measurement.
Derivative Instrument
The Company’s derivative instrument pertains to the redemption feature included in the portion of the 2030 Notes that were issued in December 2024. This instrument’s fair value is measured using a binomial lattice model, which utilizes observable inputs (e.g., the Company’s stock price) and unobservable inputs (e.g., the expected volatility and instrument specific discount rate) that cause the valuation measurements to be classified as Level 3. The significant unobservable inputs used in the determination of the fair value of instruments classified as Level 3 have an inherent measurement uncertainty that, if changed, could result in higher or lower fair value measurements of the derivative instrument as of the reporting date. The following assumptions were used within the model:
Valuation Assumptions: | December 31, 2025 | |||||||
Expected volatility | 79.6 | % | ||||||
Risk-free interest rate | 3.7 | % | ||||||
Discount rate | 7.7 | % | ||||||
Dividend yield | — | % | ||||||
Term to maturity | 4.2 years | |||||||
Stock price | $ | 50.52 | ||||||
Convertible Notes
The fair value of the Company’s Convertible Notes is estimated based on quoted prices in active markets and is classified as a Level 1 measurement.
Samarium Project Loan
The fair value of the Company’s Samarium Project Loan is based on inputs that are directly observable for substantially the full term of the liability and is classified as a Level 2 measurement. Model-based valuation techniques for which all significant inputs are observable in active markets were used to calculate the fair value of this liability.
Equipment Notes
The fair value of the Company’s equipment notes is based on inputs that are directly observable for substantially the full term of the liability and is classified as a Level 2 measurement. Model-based valuation techniques for which all significant inputs are observable in active markets were used to calculate the fair values for these liabilities.
The Company’s financial instrument assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying amounts and estimated fair values by input level of the Company’s financial instruments were as follows:
| December 31, 2025 | |||||||||||||||||||||||||||||
| (in thousands) | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 1,166,011 | $ | 1,166,011 | $ | 1,166,011 | $ | — | $ | — | |||||||||||||||||||
| Short-term investments | $ | 664,275 | $ | 664,275 | $ | 664,275 | $ | — | $ | — | |||||||||||||||||||
| Restricted cash | $ | 1,348 | $ | 1,348 | $ | 1,348 | $ | — | $ | — | |||||||||||||||||||
Derivative instrument | $ | 8,708 | $ | 8,708 | $ | — | $ | — | $ | 8,708 | |||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| 2026 Notes | $ | 67,411 | $ | 82,449 | $ | 82,449 | $ | — | $ | — | |||||||||||||||||||
| 2030 Notes | $ | 845,301 | $ | 2,172,782 | $ | 2,172,782 | $ | — | $ | — | |||||||||||||||||||
Samarium Project Loan | $ | 86,029 | $ | 98,081 | $ | — | $ | 98,081 | $ | — | |||||||||||||||||||
| Equipment notes | $ | 24,270 | $ | 25,339 | $ | — | $ | 25,339 | $ | — | |||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| (in thousands) | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 282,442 | $ | 282,442 | $ | 282,442 | $ | — | $ | — | |||||||||||||||||||
| Short-term investments | $ | 568,426 | $ | 568,426 | $ | 568,426 | $ | — | $ | — | |||||||||||||||||||
| Restricted cash | $ | 1,161 | $ | 1,161 | $ | 1,161 | $ | — | $ | — | |||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| 2026 Notes | $ | 67,259 | $ | 63,528 | $ | 63,528 | $ | — | $ | — | |||||||||||||||||||
| 2030 Notes | $ | 841,470 | $ | 902,395 | $ | 902,395 | $ | — | $ | — | |||||||||||||||||||
| Equipment notes | $ | 2,637 | $ | 2,596 | $ | — | $ | 2,596 | $ | — | |||||||||||||||||||
The following table summarizes the changes in fair value of the Company’s Level 3 assets measured on a recurring basis:
(in thousands) | Derivative Instrument | |||||||
| Balance as of January 1, 2025 | $ | — | ||||||
Included in earnings(1) | 8,708 | |||||||
Balance as of December 31, 2025 | $ | 8,708 | ||||||
(1)The in “Other income, net” within the Company’s Consolidated Statements of Operations.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 28, 2024 | |
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.