The Company maintains equity investments in companies which are accounted for under the measurement alternative described in ASC 321-10-35-2 for equity securities that lack readily determinable fair values. As of September 30, 2023, the Company had $55.6 million of investments accounted for under the measurement alternative. During the nine months ended September 30, 2023 and September 30, 2022, the Company recognized upward adjustments in value of $15.3 million and $3.9 million, respectively, for a cumulative total of upward adjustments of $19.2 million on these investments. These adjustments were based on the valuation of additional equity issued by the investee which was deemed to be an observable transaction of a similar investment under ASC 321. The upward adjustments were recorded within other income, in the condensed consolidated statement of operations. The upward fair value adjustment represents a nonrecurring fair value measurement based on observable price changes.

The Company determines at the inception of each arrangement whether an entity in which it has made an investment or in which the Company has other variable interests is considered a variable interest entity (“VIE”). The Company consolidates VIEs when it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has the power to direct activities that most significantly affect the economic performance of the VIE and has the obligation to absorb the majority of their losses or benefits. If the Company is not the primary beneficiary of a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP. Each reporting period, the Company assesses whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether the Company is the primary beneficiary.

During July 2021, the Company acquired an interest in an early stage privately held fabless wafer design company (“PWDC”), located in the western United States. The Company’s initial investment in July 2021 was $10.0 million of preferred stock and a $5.0 million convertible promissory note. In May 2023, the Company acquired an additional interest in PWDC by purchasing $13.9 million of preferred stock. As part of the May 2023 agreement, the Company’s previously held convertible note converted to $5.2 million of preferred stock and as of September 30, 2023, the Company owns more than 50% of PWDC. The Company determined that PWDC is a VIE and while the Company does no business with PWDC, other than the investment transactions described above, the Company determined that PWDC is a related party. The Company does not have the power to direct the activities that most significantly impact PWDC, and therefore, has determined that the Company is not the primary beneficiary. As the Company is not the primary beneficiary of PWDC, the Company did not consolidate the assets and liabilities of the PWDC in our financial statements and instead accounted for the investment under the measurement alternative described in ASC 321-10-35-2 using the available measurement alternative for equity securities that lack readily determinable fair value. As such, the Company’s investment is measured at cost less impairment, and adjusted to fair value if there are any observable price changes for identical or similar investment of the same issuer.

As a result of entering into an additional interest in PWDC in May 2023, the Company recorded an upward adjustment of $15.3 million during the nine months ended September 30, 2023. PWDC is funded through debt and equity. The Company's maximum exposure to loss is limited to its investment in PWDC and notes receivable and accrued interest owed to the Company from the PWDC.

The following is a summary of the Company’s holdings in the VIE, in which we are not the primary beneficiary:


	September 30, 2023		December 31, 2022
Privately Held Wafer Design Company ("PWDC")
VIE total assets	$	25,134	$	13,671
VIE total liabilities		379		6,625

Diodes' equity in VIE	$	44,420	$	10,000
Diodes' note receivable from VIE		-		5,000
Diodes' interest receivable from VIE		-		222
Diodes' maximum exposure to loss	$	44,420	$	15,222