INVESTMENTS (Notes)

3 Months Ended

Mar. 31, 2021

Investments, Debt and Equity Securities [Abstract]

The following table summarizes, by major security type, the Company's investments at March 31, 2021 (in millions):


	Cost		Gross Unrealized Gains /Upward Adjustments		Gross Unrealized Losses /Downward Adjustments		Carrying Value
Short-term investments:
Debt securities:
Trip.com Group convertible debt securities	$	500	$	—	$	—	$	500

Long-term investments:
Investments in private companies:
Debt securities	$	200	$	—	$	—	$	200
Equity securities	552		—		(100)		452
Other long-term investments:
Debt securities:
Trip.com Group convertible debt securities	25		—		(1)		24
Equity securities	463		2,649		—		3,112
Total	$	1,240	$	2,649	$	(101)	$	3,788

The following table summarizes, by major security type, the Company's investments at December 31, 2020 (in millions):


	Cost		Gross Unrealized Gains/Upward Adjustments		Gross Unrealized Losses/Downward Adjustments		Carrying Value
Short-term investments:
Debt securities:
Trip.com Group convertible debt securities	$	500	$	1	$	—	$	501







Long-term investments:
Investments in private companies:
Debt securities	$	200	$	—	$	—	$	200
Equity securities	552		3		(100)		455
Other long-term investments:
Debt securities:



Trip.com Group convertible debt securities	25		—		(1)		24

Equity securities	463		2,617		—		3,080
Total	$	1,240	$	2,620	$	(101)	$	3,759

The Company assesses the classification of its investments in the Consolidated Balance Sheets as short-term or long-term at the individual security level. Classification as short-term or long-term is based upon the maturities of the securities, as applicable, and the Company's expectations regarding the timing of sales and redemptions. Investments of a strategic nature that have been made for the purpose of affiliation or potential business advantage or in connection with a commercial relationship are included in "Long-term investments" in the Consolidated Balance Sheets, except in situations where the Company expects the investment to be realized in cash, redeemed or sold within one year.

The Company has classified its investments in debt securities as available-for-sale securities. Preferred stock that is either mandatorily redeemable or redeemable at the option of the investor is also considered a debt security for accounting purposes. Available-for-sale debt securities are reported at estimated fair value (see Note 6) with the aggregate unrealized gains and losses, net of tax, reflected in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. If the

amortized cost basis of an available-for-sale security exceeds its fair value and if the Company has the intention to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of the amortized cost basis, an impairment is recognized in the Unaudited Consolidated Statements of Operations. If the Company does not have the intention to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of the amortized cost basis and the Company determines that the decline in fair value below the amortized cost basis of an available-for-sale security is entirely or partially due to credit-related factors, the credit loss is measured and recognized as an allowance for expected credit losses along with the related expense in the Unaudited Consolidated Statements of Operations. The allowance is measured as the amount by which the debt security’s amortized cost basis exceeds the Company’s best estimate of the present value of cash flows expected to be collected. The fair values of these investments are based on the specific quoted market price of the securities or comparable securities at the balance sheet dates. Unobservable inputs are also used when little or no market data is available. See Note 6 for information related to fair value measurements.

Investments in equity securities include marketable equity securities and equity investments without readily determinable fair values. Marketable equity securities are reported at estimated fair value with changes in fair value recognized in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations. The Company also holds investments in equity securities of private companies, over which the Company does not have the ability to exercise significant influence or control. The Company elected to measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Investments in Trip.com Group

At March 31, 2021, the Company had $525 million invested in convertible senior notes issued at par value by Trip.com Group including $25 million six-year convertible senior notes issued in September 2016 and $500 million ten-year convertible senior notes issued in December 2015. The $500 million convertible senior notes include a put option allowing the Company, at its option, to require a prepayment in cash from Trip.com Group at the end of the sixth year of the note. The $500 million convertible senior notes were classified as "Short-term investments" in the Consolidated Balance Sheet at March 31, 2021 and December 31, 2020 as the Company expects to exercise the put option and redeem the investment.

The Company determined that the economic characteristics and risks of the put option related to the $500 million convertible senior notes are clearly and closely related to the notes, and therefore did not meet the requirement for separate accounting as embedded derivatives. The Company monitors the conversion features of these notes to determine whether they meet the definition of an embedded derivative during each reporting period. The conversion feature associated with the $25 million convertible senior notes meets the definition of an embedded derivative that requires separate accounting. The embedded derivative is bifurcated for fair value measurement purposes only and is reported in the Consolidated Balance Sheets with its host contract in "Long-term investments." The mark-to-market adjustments of the embedded derivative are included in "Other income (expense), net" in the Company's Unaudited Consolidated Statements of Operations.

During the three months ended March 31, 2020, the Company sold a portion of its investment in Trip.com Group ADSs, with a cost basis of $124 million, for $94 million. "Other income (expense), net" in the Unaudited Consolidated Statement of Operations for the three months ended March 31, 2020 includes a loss of $40 million related to the ADSs sold during the period and an unrealized loss of $178 million related to the ADSs held by the Company at March 31, 2020. The Company sold the remaining investment in the ADSs during the three months ended June 30, 2020.

Investment in Meituan

In 2017, the Company invested $450 million in preferred shares of Meituan, the leading e-commerce platform for local services in China. The investment has been converted to ordinary shares and classified as a marketable equity security since Meituan's initial public offering in 2018. The investment had a fair value of $3.1 billion at March 31, 2021 and December 31, 2020, which is included in "Long-term investments" in the Consolidated Balance Sheets. For the three months ended March 31, 2021 and 2020, an unrealized gain of $29 million and an unrealized loss of $81 million, respectively, related to this investment, are included in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations.

Investments in Private Companies

Equity Securities without Readily Determinable Fair Values

The Company had $552 million invested in equity securities of private companies at March 31, 2021 and December 31, 2020, including $500 million invested in Didi Chuxing. These investments are measured at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer and are included in "Long-term investments" in the Company's Consolidated Balance Sheets.

During the three months ended March 31, 2020, the Company recognized an impairment charge of $100 million to its investments in Didi Chuxing due to the impact of the COVID-19 pandemic (see Note 1), resulting in an adjusted carrying value of $400 million at March 31, 2020, December 31, 2020 and March 31, 2021 (see Note 6). No additional impairment indicators were identified as of March 31, 2021.

Debt Securities

The Company had $200 million invested in preferred shares of Grab Holdings Inc. ("Grab"), with an estimated fair value of $200 million at March 31, 2021 and December 31, 2020. The investment in Grab is classified as a debt security for accounting purposes and categorized as available-for-sale. The preferred shares are convertible to ordinary shares at the Company’s option and are mandatorily convertible upon an initial public offering. The preferred shares also contain a redemption feature that can be exercised by the Company after certain points of time. The investment is reported at estimated fair value in "Long-term investments" in the Company's Consolidated Balance Sheets, with the aggregate unrealized gains and losses, net of tax, reflected in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. The Company recognized an unrealized loss of $20 million during the three months ended March 31, 2020 and an unrealized gain of $20 million during the three months ended June 30, 2020 related to the investment in Grab.

On April 13, 2021, Grab announced its intention to pursue a public listing of its shares in the U.S. through a merger with Altimeter Growth Corp. (“Altimeter”). The transaction is subject to certain closing conditions, including, the effectiveness of the relevant registration statement filed with the SEC and the approval of Altimeter and Grab shareholders. In furtherance of the proposed transaction, the Company has entered into voting support and lock-up agreements with Grab.