Tevogen Bio Holdings Inc. Fair Value Disclosure
Note 9 — 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 our assessment of the assumptions that market participants would use in pricing the asset or liability. |
At December 31, 2023, the assets held in the Trust Account were held in a demand deposit account.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2023 and 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| December 31, 2023: | Quoted Prices in | Significant Other | Significant Other | |||||||||||||
| Level | Active Markets (Level 1) | Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Treasury Securities(1) | 1 | $ | $ | $ | ||||||||||||
| Warrant Liability- Private Placement Warrants | 3 | 29,000 | ||||||||||||||
| (1) | As of December 31, 2023, the entirety of the marketable securities held in the trust account were deposited into the demand deposit account. |
| December 31, 2022: | Quoted Prices in | Significant Other | Significant Other | |||||||||||||
| Active Markets | Observable Inputs | Unobservable Inputs | ||||||||||||||
| Level | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Treasury Securities | 1 | $ | 356,864,000 | $ | $ | |||||||||||
| Warrant Liability- Private Placement Warrants | 3 | 7,250 | ||||||||||||||
The Company utilizes a Monte Carlo simulation model to value the warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a Monte Carlo pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on industry historical volatility that matches the expected remaining life of the warrants. 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 warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
TEVOGEN BIO HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
The aforementioned warrant liabilities are not subject to qualified hedge accounting.
The following table provides quantitative information regarding Level 3 fair value measurements at December 31, 2023 and 2022:
| At December 31, 2023 | At December 31, 2022 | |||||||
| Share Price | $ | 11.13 | $ | 10.33 | ||||
| Exercise Price | $ | 11.50 | $ | 11.50 | ||||
| Term (years) | 5.21 | 5.10 | ||||||
| Industry Volatility | 6.50 | % | 4.40 | % | ||||
| Risk Free Rate | 3.77 | % | 3.91 | % | ||||
| Dividend Yield | 0.00 | % | 0.00 | % | ||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Apr 29, 2024 | Showing above |
| 2022 | Apr 17, 2023 | |
| 2021 | Apr 1, 2022 | |
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.