Equity Investments

3 Months Ended

Oct. 31, 2023

Cash and Cash Equivalents [Abstract]

Equity Investments

Note 7—Equity Investments

Equity investments consist of the following:

	October 31, 2023		July 31, 2023
	(in thousands)
Zedge, Inc. Class B common stock, 42,282 shares at October 31, 2023 and July 31, 2023	$	81	$	89
Rafael Holdings, Inc. Class B common stock, 278,810 shares at October 31, 2023 and July 31, 2023		496		558
Other marketable equity securities		281		1,497
Fixed income mutual funds		3,903		4,054
Current equity investments	$	4,761	$	6,198
Visa Inc. Series C Convertible Participating Preferred Stock (“Visa Series C Preferred”)	$	1,249	$	1,263
Convertible preferred stock—equity method investment		2,444		2,784
Hedge funds		3,002		3,002
Other		1,455		2,825
Noncurrent equity investments	$	8,150	$	9,874

Howard S. Jonas, the Chairman of the Company (an executive officer position) and the Chairman of the Company’s Board of Directors, is also the Vice-Chairman of the Board of Directors of Zedge, Inc. and the Chairman of the Board of Directors and Executive Chairman of Rafael Holdings, Inc.

The changes in the carrying value of the Company’s equity investments without readily determinable fair values for which the Company elected the measurement alternative was as follows:

	Three Months Ended October 31,
	2023			2022
	(in thousands)
Balance, beginning of period	$	1,632		$	1,501
Adjustment for observable transactions involving a similar investment from the same issuer		(14	)		(27	)
Upward adjustment		129			—
Impairments		—			—
Balance, end of the period	$	1,747		$	1,474

The Company decreased the carrying value of the shares of Visa Series C Preferred it held based on the fair value of Visa Class A common stock, including a discount for lack of current marketability, which is classified as “Adjustment for observable transactions involving a similar investment from the same issuer” in the table above. In addition, in connection with the acquisition of Regal Bancorp by SR Bancorp in September 2023, the Company adjusted the carrying value of its shares of Regal Bancorp common stock.

Unrealized losses for all equity investments measured at fair value included the following:

	Three Months Ended October 31,
	2023			2022
	(in thousands)
Net losses recognized during the period on equity investments	$	(917	)	$	(1,941	)
Plus: net losses recognized during the period on equity investments sold during the period		—			4
Unrealized losses recognized during the period on equity investments still held at the reporting date	$	(917	)	$	(1,937	)

The unrealized gains and losses for all equity investments measured at fair value in the table above included the following:

	Three Months Ended October 31,
	2023			2022
	(in thousands)
Unrealized losses recognized during the period on equity investments:
Rafael Class B common stock	$	(62	)	$	(72	)
Zedge Class B common stock	$	(8	)	$	(27	)

Equity Method Investment

The Company has an investment in shares of convertible preferred stock of a communications company (the equity method investee, or “EMI”). As of both October 31, 2023 and July 31, 2023, the Company’s ownership was 33.3% of the EMI’s outstanding shares on an as converted basis. The Company accounts for this investment using the equity method since the Company can exercise significant influence over the operating and financial policies of the EMI but does not have a controlling interest.

The Company determined that on the dates of the acquisitions of the EMI’s shares, there were differences between its investment in the EMI and its proportional interest in the equity of the EMI of an aggregate of $8.2 million, which represented the share of the EMI’s customer list on the dates of the acquisitions attributed to the Company’s interest in the EMI. These basis differences are being amortized over the 6-year estimated life of the customer list. In the accompanying consolidated statements of income, amortization of equity method basis difference is included in the equity in the net loss of investee, which is recorded in “Other expense, net” (see Note 17).

The following table summarizes the change in the balance of the Company’s equity method investment:

	Three Months Ended October 31,
	2023			2022
	(in thousands)
Balance, beginning of period	$	2,784		$	1,001
Purchase of convertible preferred stock		672			—
Equity in the net loss of investee		(670	)		(470	)
Amortization of equity method basis difference		(342	)		(182	)
Balance, end of period	$	2,444		$	349

Summarized financial information of the EMI was as follows:

	Three Months Ended October 31,
	2023			2022
	(in thousands)
Revenues	$	2,551		$	1,873
Costs and expenses:
Direct cost of revenues		2,193			1,694
Selling, general and administrative		2,093			1,636
Total costs and expenses		4,286			3,330
Loss from operations		(1,735	)		(1,457	)
Other expense, net		(104	)		(344	)
Net loss	$	(1,839	)	$	(1,801	)