Company: COHN
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001437749-25-007158
Chunk: 2022

Company: Cohen & Co Inc.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 3
Chunk 2022
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 We will reclassify any remaining equity method investment balance to other investments, at fair value and record principal transactions income for the difference.  We will record non-controlling interest expense for the SPAC shares that are distributable to the non-controlling interest holders of the sponsor entity.  The fair value of the unrestricted shares received is equal to the public trading price of the SPAC on the date of the business combination.  The fair value of the restricted shares received is adjusted downwards from the public trading price for certain sale restrictions imposed  (generally, they are restricted for sale for some time period and subject to certain hurdle prices before they become freely tradeable).  We use a Monte Carlo simulation model to determine the appropriate discount to place on shares that are subject to hurdle prices.  In the case of a SPAC business combination where we consolidate the sponsor entity, generally there is also an equity-based compensation entry to be recorded at the date of the business combination.  See the equity-based compensation section above.  We will continue to mark the sponsor entity's investment in the SPAC to market and record principal transactions income or loss and offsetting non-controlling interest income or expense until the sponsor entity itself distributes all of the SPAC shares it owns to its members and liquidates.  At that point, we will hold the SPAC shares directly (rather than through a consolidated subsidiary) and will record principal transaction income and loss until the SPAC shares themselves are liquidated.  

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     We also invest in sponsor entities that we do not consolidate because we are not the managing member of such sponsor entity or otherwise do not have the power to direct the sponsor entity's most important activities.  In these cases, we treat our investment in the sponsor entity as an equity method investment.  Furthermore, due to the difficulty of determining the fair value of such an investment in the applicable SPAC's pre-business combination period, we have chosen to not elect the fair value option.

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     If a SPAC completes a business combination and we have an equity method investment in the associated sponsor entity, the sponsor entity will record income equal to the difference between the fair value of the restricted and unrestricted shares it will receive and the carrying value of its equity method investment in the SPAC.  We will recognize our share of this gain as income from equity method affiliates.  The sponsor entity will continue to mark its investment in the SPAC to market after the business combination and we will recognize our share of the change in fair value