Strategic Investments

6 Months Ended

Jun. 30, 2022

Strategic Investments

Strategic Investments

Note 7 - Strategic Investments

Strategic investments include investments in a number of non-public technology-driven companies. We account for strategic investments under the Accounting Standards Codification (“ASC”) 321 measurement alternative for equity securities without readily determinable fair values, as there are no quoted market prices for the investments. The investments are measured at cost less impairment, adjusted for observable price changes and are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

In conjunction with certain of our strategic investments, we have the ability to commit additional capital over time through warrants and call options; for some investments, the exercisability and exercise prices are conditional on the achievement of certain performance metrics.

The following tables provide a roll-forward of the balance of strategic investments (in thousands):

	Six Months Ended June 30, 2022								Six Months Ended June 30, 2021
	Strategic investments		Warrants			Call options	Total		Strategic investments		Warrants			Total
Balance, beginning of period	$	80,775	$	2,745	$	—	$	83,520	$	9,500	$	2,211	$	11,711
Investments		45,160		—		16,340		61,500		20,500		—		20,500
Observable price changes (1)		41,502		28,539		—		70,041		40,321		534		40,855
Exercises		96,719		(30,089)		—		66,630		—		—		—
Sales		—		—		—		—		(14,546)		—		(14,546)
Balance, end of period	$	264,156	$	1,195	$	16,340	$	281,691	$	55,775	$	2,745	$	58,520

	Inception to date
	Strategic investments		Warrants			Call options	Total
Investments	$	97,728	$	2,588	$	16,340	$	116,656
Observable price changes (1)		84,255		28,696		—		112,951
Exercises		96,719		(30,089)		—		66,630
Sales		(14,546)		—		—		(14,546)
Balance, end of period	$	264,156	$	1,195	$	16,340	$	281,691

(1) Includes a realized gain of $12.3 million for the six months ended June 30, 2021.

During the three months ended June 30, 2022, we made minority, non-controlling investments in Dedrone, Inc., Fusus, Inc., and  DroneSense, Inc. for $25.0 million, $21.0 million, and $15.0 million, respectively. We were also issued warrants that give us the ability to purchase additional preferred stock, and call options to acquire all of the outstanding equity for each of these investments.

During the six months ended June 30, 2022, certain of our strategic investees issued new equity to us and/or other investors. These events represented observable price changes for our existing investments and related warrants, resulting in a net unrealized gain of $70.0 million. In addition, we exercised warrants in one of our strategic investees for a total exercise price of $6.6 million, resulting in an unrealized gain of $60.1 million that was recognized in earnings for the quarter ended June 30, 2022. The estimated fair value of the investments were calculated using valuation techniques that included both observable and unobservable inputs. This estimated fair value reflects a value that was lower than the issue per share of the new equity issued by the strategic investees because of different characteristics of the newly issued equity instruments compared to our existing investments. The valuation techniques included both Level 2 and Level 3 inputs as defined by ASC Topic 820.