Strategic Investments

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

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 where the exercisability and exercise prices are conditional on the achievement of certain partnership performance metrics. During the three months ended March 31, 2022, we attained the performance metric for the first tranche of performance stock warrants for one of our strategic investees. The amount recorded on our condensed consolidated balance sheets represents the fair value of the preferred stock warrants as of March 31, 2022.

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

	Three Months Ended March 31, 2022
	Strategic investments		Warrants for strategic investment		Total
Balance, beginning of period	$	80,775	$	2,745	$	83,520
Investments		500		—		500
Observable price changes		41,893		28,539		70,432
Balance, end of period	$	123,168	$	31,284	$	154,452

	Inception to date
	Strategic investments		Warrants for strategic investment		Total
Investments	$	53,068	$	2,588	$	55,656
Observable price changes		84,646		28,696		113,342
Sales		(14,546)		—		(14,546)
Balance, end of period	$	123,168	$	31,284	$	154,452

During the three months ended March 31, 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 an aggregate unrealized gain of $70.4 million. The estimated fair value of the existing investments was calculated using valuation techniques that included both observable and unobservable inputs, and 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.

Subsequent Events

On April 5, 2022, we exercised warrants in one of our strategic investees for a total exercise price of $6.6 million. We are still finalizing the accounting impact of the transaction, but preliminarily expect to recognize an increase of approximately $60.0 million to the carrying value of our strategic investments, which we would recognize in earnings during the quarter ending June 30, 2022.

On April 29, 2022, we made a $21.0 million non-controlling minority investment in preferred stock of Fusus, Inc. We were also issued a warrant that gives us the ability to purchase additional preferred stock and a call option to acquire the remaining outstanding equity at specified enterprise values.