Note 5 - Investment Partnerships and Other Entities |
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Investment Holdings [Text Block] |
5. Investment Partnerships and Other Entities
The Company is general partner or co-general partner of various affiliated entities whose underlying assets consist primarily of marketable securities (“Affiliated Entities”). The Company had investments in Affiliated Entities totaling $107.4 million and $114.7 million at December 31, 2023 and 2022, respectively. We also had investments in unaffiliated partnerships, offshore funds and other entities of $35.6 and $35.8 million at December 31, 2023 and 2022, respectively (“Unaffiliated Entities”). We evaluate each entity to determine its appropriate accounting treatment and disclosure. Certain of the Affiliated Entities, and none of the Unaffiliated Entities, are consolidated.
Investments in partnerships that are not required to be consolidated are accounted for using the equity method and are included in investments in partnerships on the consolidated statements of financial condition. The Company reflects the equity in earnings of these Affiliated Entities and Unaffiliated Entities as net gain/(loss) from investments on the consolidated statements of income.
Capital may generally be redeemed from Affiliated Entities on a monthly basis upon adequate notice as determined in the sole discretion of each entity’s investment manager. Capital invested in Unaffiliated Entities may generally be redeemed at various intervals ranging from monthly to annually upon notice of 30 to 95 days. Certain Unaffiliated Entities and Affiliated Entities may require a minimum investment period before capital can be voluntarily redeemed (a “Lockup Period”). No investment in an Unaffiliated Entity has an unexpired Lockup Period. The Company has no outstanding capital commitments to any Affiliated or Unaffiliated Entity.
PMV Consumer Acquisition Corp.
Commencing in August 2022, as a result of management and organizational restructuring negotiations at the Sponsor to extend the life of PMV, AC no longer controlled the manager of the Sponsor and thus no longer controlled The PMV Entities. As a result, The PMV Entities were deconsolidated from the financial statements and a loss of $3.6 million was recognized and recorded in Net gain/(loss) from investments in the consolidated statements of income. The loss represents the difference between the carrying value and fair value of our remaining interest as of the transaction date.
We accounted for our remaining interest in PMV (comprising 1 million shares of Class A common stock and 500,000 public warrants) at fair value. The initial fair value of these investments was $9.9 million based on the respective closing prices of both instruments on the transaction date. Our investments in Class A common stock and public warrants were recorded in Investments in equity securities in the condensed consolidated statements of financial condition and related earnings or loss from subsequent changes in fair value recognized in Net gain/(loss) from investments in the consolidated statements of income. On December 27, 2022, our 1 million shares of Class A common stock were redeemed in full at $10.10 per share. We have continuing involvement with PMV through our ownership of the 500,000 public warrants.
We accounted for our remaining interest in the Sponsor (comprising our original $4.0 million investment) under the equity method. The initial fair value was $1.0 million which was valued using the market approach. Our investment is recorded in Investments in partnerships in the consolidated statements of financial condition and related earnings or loss from our share of the underlying net income or loss will be recognized in Net gain/(loss) from investments in the consolidated statements of income. We have continuing involvement with the Sponsor through our ownership interest.
Prior to August 2022, AC consolidated the assets, liabilities and the results of operations of both PMV and Sponsor because AC had a controlling financial interest in these entities through AC's 100% ownership of the manager of the Sponsor. AC determined that the Sponsor was a variable interest entity (VIE) and that AC was the primary beneficiary and therefore consolidated the assets and liabilities and results of operations of the Sponsor. In addition, AC determined that PMV was a VIE due to the lack of equity at risk and therefore was consolidated by the Sponsor, who was deemed to be the primary beneficiary. Neither AC nor PMV had a right to the benefits from nor did it bear the risks associated with the marketable securities held in trust assets held by PMV.
Consolidated Entities
The following table reflects the net impact of the consolidated investment partnerships (“Consolidated Entities”) on the consolidated statements of financial condition (in thousands):
(1) Represents the summation of multiple captions from the consolidated statements of financial condition.
The following table reflects the net impact of the Consolidated Entities on the consolidated statements of income (in thousands):
Variable Interest Entity
With respect to the consolidated VIE, its assets may only be used to satisfy its obligations. The investors and creditors of the consolidated VIE have no recourse to the Company’s general assets. In addition, the Company neither benefits from such VIE’s assets nor bears the related risk beyond its beneficial interest in the VIE.
The following table presents the balances related to the VIE that is consolidated and included on the consolidated statements of financial condition as well as the Company’s net interest in the VIE (in thousands):
(1) Represents the summation of multiple captions from the consolidated statements of financial condition.
Voting Interest Entity
We have an investment partnership that is consolidated as a VOE for both 2023 and 2022 because AC has a controlling interest in the entity. This resulted in the consolidation of $72.4 million of assets, $1.4 million of liabilities, and $5.6 million of redeemable noncontrolling interests for 2023 and $75.6 million of assets, $4.4 million of liabilities, and $9.8 million of redeemable noncontrolling interests for 2022. AC’s net interest in the consolidated VOE for 2023 and 2022 was $65.4 million and $61.4 million, respectively. Approximately $3.2 million and $29.0 million of redeemable noncontrolling interest holders tendered their shares in the entity in 2023 and 2022, respectively.
Equity Method Investments
The Company’s equity method investments include investments in partnerships and offshore funds. These equity method investments are not consolidated but on an aggregate basis exceed 10% of the Company’s consolidated total assets or income.
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