ProCap Acquisition Corp Fair Value Disclosure
NOTE 8. FAIR VALUE MEASUREMENTS
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 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, liabilities, and equity, that are measured at fair value as of December 31, 2025, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Level | December 31, 2025 | |||||||
| Assets: | ||||||||
| Cash held in Trust Account | 1 | $ | 256,108,053 | |||||
| Equity: | ||||||||
| Fair value of Public Warrants for ordinary shares subject to possible redemption allocation | 3 | $ | 1,816,667 | |||||
The Company used a Black-Scholes model to value the over-allotment option. The over-allotment option liability was classified within Level 3 of the fair value hierarchy at the measurement dates due to the use of unobservable inputs inherent in pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the option. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the option. The expected life of the option is assumed to be equivalent to their remaining contractual term.
The key inputs into the Black-Scholes model were as follows for the over-allotment option:
| Inputs | May 22, 2025 (initial measurement) | |||
| Risk-free interest rate | 4.37 | % | ||
| Expected term (years) | 0.12 | |||
| Expected volatility | 2.75 | % | ||
| Exercise price | $ | 10.00 | ||
| Fair value of over-allotment unit | $ | 0.071 | ||
The fair value of the initial over-allotment option liability was $21,211. During the period from January 2, 2025 (inception) through December 31, 2025, the company recognized other income of $21,211 attributable to the change in the fair value of the over-allotment option liability. As of December 31, 2025 there was no longer an over-allotment liability included in the Company’s balance sheet as the over-allotment option liability expired unexercised on July 6, 2025, the expiration date.
The fair value of the Public Warrants is $1,816,667, or $0.218 per Public Warrant. The fair value of Public Warrants was determined using Monte Carlo Simulation Model. The Public Warrants have been classified within shareholders’ deficit and will not require remeasurement after issuance. The Public Warrants was classified within Level 3 of the fair value hierarchy at the measurement dates due to the use of unobservable inputs inherent in pricing models are assumptions related to volatility, remaining term in years, risk free rate, pre-adjusted value per share and implied market adjustment. The following table presents the quantitative information regarding market assumptions used in the valuation of the Public Warrants:
| May 22, 2025 | ||||
| Underlying stock price | $ | 10.72 | ||
| Exercise price | $ | 11.50 | ||
| Volatility | 5.3 | % | ||
| Remaining term (years) | 7.01 | |||
| Risk-free rate | 4.23 | % | ||
| Pre-adjusted value per share | $ | 2.18 | ||
| Implied market adjustment | 10.0 | % | ||
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.