Stellar V Capital Corp. (Cayman Islands) Fair Value Disclosure
NOTE 8. FAIR VALUE MEASUREMENTS
At December 31, 2025, assets held in the Trust Account were comprised of $156,724,641 in money market funds invested primarily in U.S. treasury securities. During the nine months ended December 31, 2025, the Company did not withdraw any interest income from the Trust Account.
The following table presents information about the Company’s assets that are measured at fair value as of December 31, 2025 and 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Level | December 31, 2025 | December 31, 2024 | |||||||||
| Assets: | |||||||||||
| Marketable securities held in Trust Account | 1 | $ | 156,724,641 | $ | |||||||
The over-allotment option was accounted for as a liability in accordance with ASC 815-40 and was presented within liabilities on the balance sheets. The over-allotment option liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of over-allotment option liability in the statements of operations.
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 fair value of the over-allotment option liability was $221,454 or $0.098 per over-allotment unit. The key inputs into the Black-Scholes model were as follows at initial measurement of the over-allotment option:
| Inputs | January 31, 2025 | |||
| Risk-free interest rate | 4.37 | % | ||
| Expected term (years) | 0.12 | |||
| Expected volatility | 4.91 | % | ||
| Exercise price | $ | 10.00 | ||
| Fair value of over-allotment unit | $ | 0.098 | ||
The following table provides a reconciliation of changes in fair value of the beginning and ending balances for the Company’s over-allotment option liability classified as Level 3 for the year ended December 31, 2025:
| Fair value of over-allotment option liability at January 1, 2025 | $ | |||
| Initial fair value of over-allotment option liability at January 31, 2025 | 221,454 | |||
| Change in fair value of over-allotment option liability | (221,454 | ) | ||
| Fair value of over-allotment option liability at December 31, 2025 | $ |
The fair value of the Public Warrants was $1,222,500, or $0.163 per Public Warrant. The fair value of the Public Warrants was determined using the 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 Level 3 valuation of the Public Warrants:
| January 31, 2025 | ||||
| Estimated share price | $ | 9.92 | ||
| Exercise price | $ | 11.50 | ||
| Term (years) | 2.38 | |||
| Risk-free rate | 4.24 | % | ||
| Volatility | 5.36 | % | ||
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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.