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Fair Value Measurement of Assets and Liabilities
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurement of Assets and Liabilities Fair Value Measurement of Assets and Liabilities
The following tables present our financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated (in millions):
June 30, 2024
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Assets:   
Cash, cash equivalents and restricted cash
Cash and cash equivalents$1,963 $1,963 $— $— 
Customer accounts478 478 — — 
Restricted cash included in other current assets112 112 — — 
Restricted cash included in other assets2 2 — — 
Total cash, cash equivalents and restricted cash2,555 2,555 — — 
Derivatives380 — 41 339 
Short-term investments:
Corporate debt securities2,749 — 2,749 — 
Government and agency securities454 — 454 — 
Total short-term investments3,203 — 3,203 — 
Long-term investments:
Corporate debt securities770 — 770 — 
Government and agency securities409 — 409 — 
Equity investment under the fair value option307 — — 307 
Total long-term investments1,486 — 1,179 307 
Total financial assets$7,624 $2,555 $4,423 $646 
Liabilities:
Aurelia option
$109 $— $— $109 
Derivatives$10 $— $10 $— 
December 31, 2023
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Assets:   
Cash, cash equivalents and restricted cash
Cash and cash equivalents$1,985 $1,985 $— $— 
Customer accounts481 481 — — 
Restricted cash included in other current assets23 23 — — 
Restricted cash included in other assets4 4 — — 
Total cash, cash equivalents and restricted cash2,493 2,493 — — 
Equity investment in Adevinta4,474 4,474 — — 
Derivatives396 — 32 364 
Short-term investments:
Corporate debt securities2,162 — 2,162 — 
Government and agency securities371 — 371 — 
Total short-term investments2,533 — 2,533 — 
Long-term investments:
Corporate debt securities328 — 328 — 
Government and agency securities271 — 271 — 
Equity investment under the fair value option335 — — 335 
Total long-term investments934 — 599 335 
Total financial assets$10,830 $6,967 $3,164 $699 
Liabilities:
Other liabilities$10 $— $— $10 
Derivatives$33 $— $33 $— 

Our financial assets and liabilities are valued using market prices on both active markets (Level 1), less active markets (Level 2) and little or no market activity (Level 3). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. Level 3 instrument valuations typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. We did not have any transfers of financial instruments between valuation levels during the six months ended June 30, 2024.

Other financial instruments, including accounts receivable, funds receivable, accounts payable and funds payable, are carried at cost, which approximates their fair value because of the short-term nature of these instruments.
Fair value measurement of derivative instruments

The majority of our derivative instruments are valued using pricing models that take into account the contract terms as well as multiple inputs where applicable, such as equity prices, interest rate yield curves, option volatility and currency rates. Our warrant, which is accounted for as a derivative instrument, is valued using a Black-Scholes model. Key assumptions used in the valuation include risk-free interest rates, Adyen’s common stock price, equity volatility and common stock outstanding, exercise price, and details specific to the warrant. The value is also probability adjusted for management’s assumptions with respect to vesting of the remaining three tranches which are each subject to meeting processing volume milestone targets. These assumptions and the probability of meeting processing volume milestone targets may have a significant impact on the value of the warrant. Refer to “Note 6 — Derivative Instruments” for further details on our derivative instruments.

The following table presents a reconciliation of the opening to closing balance of assets measured using significant unobservable inputs (Level 3) as of the dates indicated (in millions):
June 30,
2024		December 31,
2023
Opening balance at beginning of period$364 $214 
Change in fair value(25)150 
Closing balance at end of period$339 $364 

The following table presents quantitative information about Level 3 significant unobservable inputs used in the fair value measurement of the warrant as of June 30, 2024 (in millions, except percentages):
Fair value Valuation technique
Unobservable Input (1)
Range (weighted average)
Warrant$339 Black-Scholes and Monte CarloProbability of vesting
0.0% - 95.0% (78.4%)
Equity volatility
(44%)
(1) Probability of vesting was weighted by the unadjusted value of the tranches. For volatility, the average represents the arithmetic average of the points within the range and is not weighted by the relative fair value or notional amount.

Fair value measurement of equity investments

Certain equity investments are measured at fair value on a recurring basis, including our equity investment in Adevinta and equity investments under the fair value option.

Our equity investment in Adevinta was accounted for under the fair value option and classified within Level 1 in the fair value hierarchy as the fair value was measured based on Adevinta’s closing stock price and prevailing foreign exchange rate at each balance sheet date.

Our equity investment in Gmarket is accounted for under the fair value option.

The following table presents a reconciliation of the opening to closing balance of the equity investment in Gmarket measured using significant unobservable inputs (Level 3) as of the dates indicated (in millions):
June 30,
2024		December 31,
2023
Opening balance at beginning of period$335 $431 
Change in fair value(28)(96)
Closing balance at end of period$307 $335 
This investment is classified within Level 3 in the fair value hierarchy as valuation of the investment reflects management’s estimate of assumptions that market participants would use in pricing the asset. The following table presents quantitative information about Level 3 significant unobservable inputs used in the fair value measurement of the equity investment in Gmarket as of June 30, 2024 that may have a significant impact on the overall valuation (in millions, except multiples):
Fair value Valuation technique
Unobservable Input (1)
Range
Equity investment in Gmarket$307 Market multiplesRevenue multiple — GPC method
0.7x — 1.7x
Revenue multiple — GMAC method
1.0x — 2.7x
(1) The primary unobservable inputs used in the fair value measurement of our equity investment in Gmarket under the fair value option, when using the Guideline Public Company (GPC) method and the Guideline Merged and Acquired Company (GMAC) method under the market multiple approach, are the respective revenue multiples. Significant increases (decreases) in the revenue multiples in isolation would result in significantly higher (lower) fair value measurement. The market multiples are derived from respective groups of guideline public companies and guideline merged and acquired companies.

Certain other immaterial equity investments under the fair value option aggregating to $47 million as of both June 30, 2024 and December 31, 2023 are measured at fair value using the net asset value per share (or its equivalent) practical expedient, and have not been classified in the fair value hierarchy.

Refer to “Note 5 — Investments” for further details about our equity investments.

Fair value measurement of Aurelia Option

In connection with the Transactions discussed in “Note 5 — Investments”, we granted Aurelia UK Feederco Limited the Aurelia Option, which, if exercised, would reduce our ownership in Aurelia to approximately 8.3% based on the outstanding equity of Aurelia as of the date of the Transactions. The Aurelia Option is valued using a Black-Scholes model where key inputs and assumptions used in the valuation include risk-free interest rates, the common stock price as of June 30, 2024, equity volatility, exercise price, and details specific to the Aurelia Option. The Aurelia Option is reported within the current liabilities section in our condensed consolidated balance sheet and is classified within Level 3 in the fair value hierarchy as the valuation reflects management’s estimate of assumptions that market participants would use in pricing the equity investment. The Aurelia Option was valued at $109 million as of June 30, 2024.