Rithm Acquisition Corp. Fair Value Disclosure
NOTE 7. FAIR VALUE MEASUREMENTS
The fair value of the Public Warrants is $2,464,833, or $0.32 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 following table presents the quantitative information regarding market assumptions used in the valuation of the Public Warrants:
| February 28, 2025 |
| ||
Valuation date price | $ | 9.89 | ||
Strike price | $ | 11.50 | ||
Expected time until merger (years) |
| 1.50 | ||
Time remaining post-merger (years) |
| 5.00 | ||
Probability of merger closing |
| 25.00 | % | |
Effective expected warrant term |
| 2.75 | ||
Peer implied volatility |
| 7.55 | % | |
Risk-free rate (term matched) |
| 3.97 | % | |
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.