Equity-Accounted Investments And Other Long-Term Assets

6 Months Ended

Dec. 31, 2020

Equity-Accounted Investments And Other Long-Term Assets [Abstract]

Equity-Accounted Investments And Other Long-Term Assets

6.Equity-accounted investments and other long-term assets

Refer to Note 10 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2020, for additional information regarding its equity-accounted investments and other long-term assets.

Equity-accounted investments

The Company’s ownership percentage in its equity-accounted investments as of December 31, 2020, and June 30, 2020, was as follows:

	December 31,			June 30,
	2020			2020
Bank Frick & Co AG (“Bank Frick”)		35	%	35	%
Finbond Group Limited (“Finbond”)		31	%	31	%
Carbon Tech Limited (“Carbon”)		25	%	25	%
Revix (“Revix”)		25	%	25	%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)		50	%	50	%
V2 Limited (“V2”)		50	%	50	%
Walletdoc Proprietary Limited (“Walletdoc”)		-		20	%

6.Equity-accounted investments and other long-term assets (continued)

Equity-accounted investments (continued)

Finbond

As of December 31, 2020, the Company owned 268,820,933 shares in Finbond representing approximately 31% of its issued and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange (“JSE”) and its closing price on December 31, 2020, the last trading day of the month, was ZAR 0.99 per share. The market value, using the December 31, 2020, closing price, of the Company’s holding in Finbond on December 31, 2020, was ZAR 266.1 million ($18.2 million translated at exchange rates applicable as of December 31, 2020).

Finbond published its half-year results to August 2020 in October 2020, which included the financial impact of the COVID-19 pandemic on its reported results during the reporting period. Finbond incurred losses during the six months to August 2020, and experienced a slow-down in its lending activities. Finbond reported that its lending activities have increased again since August 2020, albeit at a slower pace compared with the prior calendar period. Finbond’s share price declined substantially during the period from its fiscal year end (February 2020) to September 30, 2020, and the weakness in its traded share price continued post September 30, 2020. The Company considered the combination of the slow-down in business activity and the lower share price as impairment indicators. The Company performed an impairment assessment of its holding in Finbond as of September 30, 2020. The Company recorded an impairment loss of $16.8 million during the quarter ended September 30, 2020, related to the other-than-temporary decrease in Finbond’s value, which represented the difference between the determined fair value of the Company’s interest in Finbond and the Company’s carrying value (before the impairment). There is limited trading in Finbond shares on the JSE because it has three shareholders that own approximately 90% of its issued and outstanding shares between them. The Company calculated a fair value per share for Finbond by applying a liquidity discount of 15% to the September 30, 2020, Finbond closing price of $1.04.

The Company performed a further impairment assessment of its holding in Finbond as of December 31, 2020, following a modest decline in its market price during the quarter ended December 31, 2020. The Company recorded an impairment loss of $0.8 million during the quarter ended December 31, 2020, related to the other-than-temporary decrease in Finbond’s value, which represented the difference between the determined fair value of the Company’s interest in Finbond and the Company’s carrying value (before the impairment). The Company calculated a fair value per share for Finbond by applying a liquidity discount of 15% to the December 31, 2020, Finbond closing price. The total impairment charge for the six months ended December 31, 2020, was $17.6 million.

V2 Limited

In June 2020, V2 Limited drew down $0.5 million of the $5.0 million working capital facility granted by the Company to V2. In September 2020, the Company agreed to grant V2 an option to acquire the Company’s entire interest in V2 for an option price of $5.0 million plus the face value of the outstanding working capital facility. The option expired on December 31, 2020. The Company and V2 also agreed to reduce the $5.0 million working capital facility to $1.5 million. In October 2020, V2 drew down the remaining available $1.0 million of the working capital facility. The Company does not expect to recover its carrying value in V2 and has impaired its remaining interest in V2, recording an impairment loss of $0.5 million during the three and six months ended December 31, 2020. The Company also created an allowance for doubtful loans receivable of $0.5 million during the three and six months ended December 31, 2020, related to a portion of the working capital facility outstanding as of December 31, 2020.

Other

In November 2020, the Company’s subsidiary, Net1 SA, signed an agreement with Walletdoc under which Walletdoc agreed to repay the loan due to Net1 SA in full and Net1 SA agreed to dispose of its entire interest in Walletdoc to Walletdoc.

6.Equity-accounted investments and other long-term assets (continued)

Equity-accounted investments (continued)

Summarized below is the movement in equity-accounted investments and loans provided to equity-accounted investments during the six months ended December 31, 2020:

					Bank Frick		Finbond		Other(1)		Total
Investment in equity
	Balance as of June 30, 2020				$	29,739	$	30,876	$	4,601	$	65,216
		Stock-based compensation				-		(40)		-		(40)
		Comprehensive (loss) income:				979		(18,579)		(865)		(18,465)
			Other comprehensive income			-		1,688		-		1,688
			Equity accounted (loss) earnings			979		(20,267)		(865)		(20,153)
				Share of net (loss) income		979		(2,617)		(317)		(1,955)
				Impairment		-		(17,650)		(548)		(18,198)
		Dividends received				-		-		(125)		(125)
		Disposal of equity-accounted investment				-		-		(13)		(13)
		Foreign currency adjustment(2)				2,301		3,178		74		5,553
	Balance as of December 31, 2020				$	33,019	$	15,435	$	3,672	$	52,126
Investment in loans:
	Balance as of June 30, 2020				$	-	$	-	$	620	$	620
		Loans granted				-		-		1,238		1,238
		Allowance for doubtful loans				-		-		(738)		(738)
		Loans repaid				-		-		(134)		(134)
		Foreign currency adjustment(2)				-		-		14		14
	Balance as of December 31, 2020				$	-	$	-	$	1,000	$	1,000
							Equity		Loans		Total
Carrying amount as of :
		June 30, 2020					$	65,216	$	620	$	65,836
		December 31, 2020					$	52,126	$	1,000	$	53,126

(1) Includes Carbon, SmartSwitch Namibia, V2 and Walletdoc.

(2) The foreign currency adjustment represents the effects of the fluctuations of the Swiss franc, ZAR, Nigerian naira and Namibian dollar, against the U.S. dollar on the carrying value.

Other long-term assets

Summarized below is the breakdown of other long-term assets as of December 31, 2020, and June 30, 2020:

		December 31,			June 30,
			2020		2020
Total equity investments		$	42,121	$	26,993
	Investment in 15% of Cell C, at fair value (Note 5)		-		-
	Investment in 12% of MobiKwik		42,121		26,993
	Investment in 87.5% of CPS(1)		-		-
Total held to maturity investments			-		-
	Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes		-		-
Long-term portion of amount due from DNI related to sale of remaining interest in DNI			-		2,857
Policy holder assets under investment contracts (Note 8)			593		490
Reinsurance assets under insurance contracts (Note 8)			1,193		1,006
	Total other long-term assets	$	43,907	$	31,346

(1) On October 16, 2020, the High Court of South Africa, Gauteng Division, Pretoria ordered that CPS be placed into liquidation.

6.Equity-accounted investments and other long-term assets (continued)

Other long-term assets (continued)

MobiKwik

In early November 2020, MobiKwik entered into an agreement to raise additional capital through the issuance of additional shares to a new shareholder at a valuation of $135.54 per share. The Company considered this transaction to be an observable price change in an orderly transaction for similar or identical equity securities issued by MobiKwik. The Company used this valuation as the basis for its adjustment to increase the carrying value in its investment in MobiKwik by $15.1 million from $27.0 million to $42.1 million as of December 31, 2020. The change in the fair value of MobiKwik of $15.1 million is included in the caption “Change in fair value of equity securities” in the unaudited condensed consolidated statement of operations for the three and six months ended December 31, 2020.

Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of December 31, 2020:

				Cost basis		Unrealized holding		Unrealized holding		Carrying
						gains		losses		value
Equity securities:
	Investment in MobiKwik		$	26,993	$	15,128	$	-	$	42,121
	Investment in CPS			-		-		-		-
Held to maturity:
	Investment in Cedar Cellular notes			-		-		-		-
		Total	$	26,993	$	15,128	$	-	$	42,121

Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of June 30, 2020:

				Cost basis		Unrealized holding		Unrealized holding		Carrying
						gains		losses		value
Equity securities:
	Investment in MobiKwik		$	26,993	$	-	$	-	$	26,993
	Investment in CPS			-		-		-		-
Held to maturity:
	Investment in Cedar Cellular notes			-		-		-		-
		Total	$	26,993	$	-	$	-	$	26,993

Contractual maturities of held to maturity investments

Summarized below is the contractual maturity of the Company’s held to maturity investment as of December 31, 2020:

			Cost basis		Estimated fair value(1)
Due in one year or less		$	-	$	-
Due in one year through five years(2)			-		-
Due in five years through ten years			-		-
Due after ten years			-		-
	Total	$	-	$	-

(1) The estimated fair value of the Cedar Cellular note has been calculated utilizing the Company’s portion of the security provided to the Company by Cedar Cellular, namely, Cedar Cellular’s investment in Cell C.

(2) The cost basis is zero ($0.0 million).