Investments

6 Months Ended

Jun. 30, 2021

The following tables summarize the unrealized gains and losses and estimated fair value of our investments classified as available-for-sale and restricted cash (in millions):


	June 30, 2021
	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Short-term investments:
Restricted cash	$	15	$	—	$	—	$	15
Corporate debt securities	4,596		2		—		4,598
Government and agency securities	125		—		—		125



	$	4,736	$	2	$	—	$	4,738
Long-term investments:
Corporate debt securities	635		2		(1)		636
Government and agency securities	109		—		—		109
	$	744	$	2	$	(1)	$	745


	December 31, 2020
	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Short-term investments:
Restricted cash	$	137	$	—	$	—	$	137
Corporate debt securities	2,252		3		—		2,255



	$	2,389	$	3	$	—	$	2,392
Long-term investments:
Corporate debt securities	284		2		—		286

	$	284	$	2	$	—	$	286

We consider cash to be restricted when withdrawal or general use is legally restricted. At December 31, 2020 our restricted cash balance primarily comprised of cash on deposit with banks restricted to safeguard seller payables.

Investments classified as available-for-sale are carried at fair value with changes reflected in other comprehensive income. Where there is an intention or a requirement to sell an impaired available-for-sale debt security, the entire impairment is recognized in earnings with a corresponding adjustment to the amortized cost basis of the security. We presently do not intend to sell any of the available-for-sale debt securities in an unrealized loss position and expect to realize the full value of all these investments upon maturity or sale.

We regularly review investment securities for credit impairment using both qualitative and quantitative criteria. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses will be recorded through interest and other, net for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. We did not recognize any credit-related impairment through an allowance for credit losses as of June 30, 2021.

Investment securities in a continuous loss position for less than 12 months had an estimated fair value of $3.0 billion and an immaterial amount of unrealized losses as of June 30, 2021, and an estimated fair value of $261 million and an immaterial amount of unrealized losses as of December 31, 2020. As of June 30, 2021 and December 31, 2020 there were no investment securities in a continuous loss position for greater than 12 months. Refer to “Note 15 – Accumulated Other Comprehensive Income” for amounts reclassified to earnings from unrealized gains and losses.

The estimated fair values of our short-term and long-term investments classified as available-for-sale and restricted cash by date of contractual maturity as of June 30, 2021 are as follows (in millions):


	June 30, 2021
One year or less (including restricted cash of $15)	$	4,738
One year through two years	243
Two years through three years	289
Three years through four years	80
Four years through five years	133







	$	5,483

Equity Investments

The following table provides a summary of our equity investments (in millions):


	Balance Sheet Location	June 30, 2021		December 31, 2020
Equity investment in Adevinta	Equity investment in Adevinta	$	10,354	$	—
Equity investments without readily determinable fair values	Long-term investments	571		539
Equity investments under the equity method of accounting	Long-term investments	7		8
Total equity investments		$	10,932	$	547

During the second quarter of 2021, we recorded an upward adjustment for an observable price change of $41 million to the carrying value of a strategic investment. The upward adjustment was recorded in interest and other, net on our condensed consolidated statement of income.

Upon completion of the transfer of our Classifieds business to Adevinta we retained an equity investment of 44% in Adevinta valued at $10.8 billion at the close of the transfer. At the initial recognition of the equity investment, we elected the fair value option where subsequent changes in fair value are recognized in earnings. The investment is classified within Level 1 in the fair value hierarchy as the valuation can be obtained from real time quotes in active markets. The fair value of the equity investment is measured based on Adevinta’s closing stock price and prevailing foreign exchange rate at each balance sheet date and the changes in fair value are reflected in interest and other, net in the condensed consolidated statement of income. We believe the fair value option election creates more transparency of the current value in the equity investment in Adevinta. Our non-voting shares are convertible to voting shares on a one-to-one basis, subject to a limitation of 33% voting interest. For the three and six months ended June 30, 2021 a loss of $422 million was recorded in interest and other, net on our condensed consolidated statement of income related to the investment.

On July 14, 2021, we entered into a share purchase agreement with Permira to sell approximately 125 million of our voting shares in Adevinta for total consideration of $2.25 billion. The price represents an approximate 7% discount to the 10-day VWAP of Adevinta shares as of July 12, 2021 and a 5% discount to the 30-day VWAP as of July 12, 2021. In addition, we granted Permira an option, exercisable within 30 days after the date of the purchase agreement, to purchase approximately 10 million additional voting shares for $180 million in consideration. On July 29, 2021, Permira exercised the option. At the close of both transactions, our ownership in Adevinta will be reduced to 33%. The transactions are expected to close in the fourth quarter of 2021, subject to the receipt of required regulatory approvals.

The following table provides a summary of unrealized gains and losses recorded in interest and other, net during the three and six months ended June 30, 2021 and 2020 related to equity investments held at June 30, 2021 (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net gains/(losses) recognized during the period on equity investments	$	(380)	$	—	$	(380)	$	—
Less: Net gains/(losses) recognized during the period on equity investments sold during the period	—		—		—		—
Total unrealized gains/(losses) on equity investments still held at June 30, 2021	$	(380)	$	—	$	(380)	$	—

The following table summarizes the change in total carrying value during the three and six months ended June 30, 2021 and 2020 related to equity investments without readily determinable fair values still held (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Carrying value, beginning of period	$	528	$	296	$	539	$	307
Additions	1		—		1		—

Upward adjustments for observable price changes	41		—		41		—
Downward adjustments for observable price changes and impairment	—		(40)		—		(40)
Foreign currency translation and other	1		5		(10)		(6)
Carrying value, end of period	$	571	$	261	$	571	$	261

For such equity investments without readily determinable fair values still held at June 30, 2021, the cumulative upward adjustment for observable price changes were $280 million and cumulative downward adjustments for observable price changes and impairments were $121 million.