Investments

9 Months Ended

Sep. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Investments consist of equity and debt securities. There were no investments in an unrealized loss position as of September 30, 2022 and December 31, 2021.

Investment in equity securities

Investment in Consensus

Investment in equity securities consists of publicly traded common stock of Consensus. During the three and nine months ended September 30, 2022, the Company completed the non-cash debt-for-equity exchanges of 500,000 shares and 2,800,000 shares, respectively, of its Investment in Consensus for the extinguishment of $22.3 million and $112.3 million, respectively, of principal of the Company’s Term Loan Facilities, and related interest.

Gains (losses) on equity securities recognized in ‘Unrealized gain (loss) on short-term investments held at the reporting date’ consisted of the following (in thousands):


	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Net gains (losses) during the period	$	4,672	$	(61,937)
Less: gains (losses) on securities sold during the period	471		(47,772)
Unrealized gains (losses) recognized during the period on equity securities held at the reporting date	$	4,201	$	(14,165)

As of September 30, 2022, the Company holds approximately 1.2 million shares of the common stock of Consensus.

Other investment

During the second quarter of 2021, the Company recorded a $16.7 million impairment loss on certain equity securities related to a decline in value due to a pending sales transaction of an investee. The Company was not expected to recover the recorded cost of these securities and thus reduced such amount to what the Company expected to receive as a result of the sale. The Company subsequently sold these equity securities during fiscal year 2021.

Investment in corporate debt securities

On April 12, 2022, the Company entered into an agreement with an entity to acquire 4% convertible notes with an aggregate value of $15.0 million, which upon conversion would represent an equity interest equal to at least 3%, on a fully converted basis, of the entity that issued the notes.

This investment is included in ‘Long-term investments, net’ in our Condensed Consolidated Balance Sheets and is classified as available-for-sale and initially measured at its transaction price and subsequently remeasured at fair value, with unrealized gains and losses reported as a component of other comprehensive income.

The table below summarizes the carrying value and the maximum exposure of Company’s investment in corporate debt securities as of September 30, 2022 (in thousands):


	September 30, 2022
	Carrying value		Maximum exposure
Investment in corporate debt securities	$	15,000	$	15,000

The Company’s maximum exposure to loss is limited to its proportional ownership in the investee. In addition, the Company is not required to contribute capital in an aggregate amount in excess of its capital commitment.

The following table summarizes the gross unrealized gains and losses and fair values for investments classified as available-for-sale, with the unrealized gains and losses reported as a component of other comprehensive income (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2022
Investment in corporate debt securities	$	15,000	$	—	$	—	$	15,000
Total	$	15,000	$	—	$	—	$	15,000

The following table summarizes the Company’s corporate debt securities designated as available-for-sale, classified by the contractual maturity date of the security (in thousands):


	September 30, 2022		December 31, 2021
Due within 1 year	$	—	$	—
Due within more than 1 year but less than 5 years	15,000		—
Due within more than 5 years but less than 10 years	—		—
Due 10 years or after	—		—
Total	$	15,000	$	—

Equity method investment

On September 25, 2017, the Company entered into a commitment to invest $200 million (approximately 76.6% of equity) in an investment fund (the “Fund”). The primary purpose of the Fund is to provide a limited number of select investors with the opportunity to realize long-term appreciation from public and private companies, with a particular focus on the technology and life science industries. The general activities of the Fund is to buy, sell, hold and otherwise invest in securities of every kind and nature and rights and options with respect thereto, including, without limitation, stock, notes, bonds, debentures and evidence of indebtedness; to exercise all rights, powers, privileges and other incidents of ownership or possession with respect to securities held or owned by the Fund; to enter into, make and perform all contracts and other undertakings; and to engage in all activities and transactions as may be necessary, advisable or desirable to carry out the foregoing.

The manager, OCV Management, LLC, and general partner of the Fund are entities with respect to which Richard S. Ressler, former Chairman of the Board of Directors (the “Board”) of the Company, is indirectly the majority equity holder. Mr. Ressler’s tenure with the Board ended as of May 10, 2022. As a limited partner in the Fund, prior to the settlement of certain litigation generally related to the Company’s investment in the Fund in January 2022, the Company paid an annual management fee to the manager equal to 2.0% of capital commitments. In addition, subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company has received distributions equal to its invested capital, the Fund’s general partner would be entitled to a carried interest equal to 20%. The Fund has a six year investment period, subject to certain exceptions. The commitment was approved by the Audit Committee of the Board in accordance with the Company’s related-party transaction approval policy. At the time of the settlement of the litigation (see Note 9 – Commitments and Contingencies), the Company had invested approximately $128.8 million in the Fund. In connection with the settlement of the litigation, among other terms, no further capital calls will be made in connection with the Company’s investment in the Fund, nor will any management fees be paid by the Company to the manager. As such, during the nine months ended September 30, 2022, the Company received no capital call notices from the manager of the Fund. During the nine months ended September 30, 2021, the Company received capital call notices from the manager of the Fund for $21.2 million, inclusive of certain management fees. Approximately $21.2 million was paid for capital call notices during the nine months ended September 30, 2021. During both the nine months ended September 30, 2022 and 2021, the Company received no distributions from OCV.

The Company recognizes its equity in the net earnings or losses relating to the investment in OCV on a one-quarter lag (including management fees) due to the timing and availability of financial information from OCV. If the Company becomes aware of a significant decline in value that is other-than-temporary, the loss will be recorded in the period in which the Company identifies the decline. During the three months ended September 30, 2022 and 2021, the Company recognized an

investment loss of $3.2 million and $1.9 million, net of tax benefit, respectively. During the nine months ended September 30, 2022 and 2021, the Company recognized an investment (loss) gain of $(10.1) million and $16.6 million, net of tax benefit (expense), respectively. The gains and losses were primarily the result of gains and losses in the underlying investments. During the three months ended September 30, 2022, the Company recognized no expense for management fees, and during three months ended September 30, 2021, the Company recognized expense for management fees of $0.8 million, net of tax benefit. During the nine months ended September 30, 2022 and 2021, the Company recognized expense for management fees of $1.5 million and $2.3 million, net of tax benefit, respectively.

The following table discloses the carrying amount for the Company’s equity method investment (in thousands). These equity securities are included within ‘Long-term investments’ in the Condensed Consolidated Balance Sheets.


	September 30, 2022		December 31, 2021
Equity securities	$	109,228	$	122,593
Maximum exposure to loss	$	109,228	$	122,593

As a limited partner, the Company’s maximum exposure to loss is limited to its proportional ownership in the partnership. In addition, the Company is not required to contribute capital in an aggregate amount in excess of its capital commitment and any expected losses will not be in excess of the Capital Account. Finally, there are no call or put options, or other types of arrangements, which limit the Company’s ability to participate in losses and returns of the Fund.