v3.20.1
Investments and Fair Value Measurement (Tables)
 3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Marketable and Non-Marketable Securities
The Company’s investments on the condensed consolidated balance sheets consisted of the following as of December 31, 2019 and March 31, 2020 (in millions):
 
 
As of
 
 
December 31, 2019
 
March 31, 2020
Classified as short-term investments:
 
 
 
 
Marketable debt securities (1):
 
 
 
 
Commercial paper
 
148

 
248

U.S. government and agency securities
 
93

 
186

Corporate bonds
 
199

 
397

Short-term investments
 
$
440

 
$
831

 
 
 
 
 
Classified as investments:
 
 
 
 
Non-marketable equity securities
 
 
 
 
Didi (2)
 
$
7,953

 
$
6,299

Other (3)
 
204

 
272

Non-marketable debt securities
 
 
 
 
Grab (4)
 
2,336

 
2,109

Other (3)
 
34

 
7

Investments
 
$
10,527

 
$
8,687

(1) Excluding marketable debt securities classified as cash equivalents and restricted cash equivalents.
(2) On August 1, 2016, the Company completed the sale of the Company’s interest in Uber China to Didi and received approximately 52 million shares of Didi’s Series B-1 preferred stock as consideration valued at approximately $6.0 billion at time of transaction.
(3) These balances include certain investments in securities recorded at fair value with changes in fair value recorded in earnings due to the election of the fair value option of accounting for financial instruments.
(4) Recorded at fair value with changes in fair value recorded in other comprehensive income (loss), net of tax, unless subject to credit loss.
Schedule of Assets and Liabilities Measured on Recurring Basis
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in millions):
 
 
As of December 31, 2019
 
As of March 31, 2020
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
5,104

 
$
—

 
$
—

 
$
5,104

 
$
4,778

 
$
—

 
$
—

 
$
4,778

Commercial paper
 
—

 
233

 
—

 
233

 
—

 
355

 
—

 
355

U.S. government and agency securities
 
—

 
153

 
—

 
153

 
—

 
269

 
—

 
269

Corporate bonds
 
—

 
199

 
—

 
199

 
—

 
403

 
—

 
403

Non-marketable debt securities
 
—

 
—

 
2,370

 
2,370

 
—

 
—

 
2,116

 
2,116

Non-marketable equity securities
 
—

 
—

 
98

 
98

 
—

 
—

 
21

 
21

Total financial assets
 
$
5,104

 
$
585

 
$
2,468

 
$
8,157

 
$
4,778

 
$
1,027

 
$
2,137

 
$
7,942
Schedule of Amortized Cost and Fair Value of Debt Security with Contractual Maturity Dates
The following table summarizes the amortized cost and fair value of the Company’s debt securities with a stated contractual maturity or redemption date as of March 31, 2020 (in millions):
 
 
As of March 31, 2020
 
 
Amortized Cost
 
Fair Value
Within one year
 
$
797

 
$
797

One year through five years
 
2,514

 
2,339

Total
 
$
3,311

 
$
3,136
Schedule of Financial Assets Measured at Fair Value on a Recurring Basis
The following table summarizes the amortized cost, unrealized gains and losses, and fair value of the Company’s debt securities at fair value on a recurring basis as of December 31, 2019 and March 31, 2020 (in millions):
 
 
As of December 31, 2019
 
As of March 31, 2020
 
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Allowance for Credit Loss
 
Fair Value
Commercial paper
 
$
233

 
$
—

 
$
—

 
$
233

 
$
355

 
$
—

 
$
—

 
$
—

 
$
355

U.S. government and agency securities
 
153

 
—

 
—

 
153

 
269

 
—

 
—

 
—

 
269

Corporate bonds
 
199

 
—

 
—

 
199

 
405

 
—

 
(2
)
 
—

 
403

Non-marketable debt securities
 
2,309

 
61

 
—

 
2,370

 
2,312

 
—

 
(23
)
 
(173
)
 
2,116

Total
 
$
2,894

 
$
61

 
$
—

 
$
2,955

 
$
3,341

 
$
—

 
$
(25
)
 
$
(173
)
 
$
3,143
Allowance for Credit Losses Related to Debt Securities
The following table presents information about the allowance for credit losses on debt securities (in millions):
 
 
Non-marketable
Debt Securities
Balance as of January 1, 2020
 
$
—

Impact due to adoption of ASU 2016-13
 
—

Credit losses on securities for which credit losses were not previously recorded
 
(173
)
Balance as of March 31, 2020
 
$
(173
)
Schedule of Fair Value Assumptions on Significant Unobservable Inputs
The following table summarizes information about the significant unobservable inputs used in the fair value measurement for the Company’s investment in Grab as of December 31, 2019 and March 31, 2020:
Fair value method
 
Relative weighting
 
Key unobservable input
Financing transactions
 
100%
 
Transaction price per share
 
$6.16
 
 
 
 
Volatility
 
54% - 62%
 
 
 
 
Estimated time to liquidity
 
2.25 - 2.5 years
Schedule of Reconciliation Using Significant Unobservable Inputs, Assets
The following table presents a reconciliation of the Company’s financial assets measured and recorded at fair value on a recurring basis as of March 31, 2020, using significant unobservable inputs (Level 3) (in millions):
 
 
Non-marketable
Debt Securities
 
Non-marketable Equity Security
Balance as of December 31, 2018
 
$
2,370

 
$
—

Total net gains (losses)
 


 


Included in earnings
 
(8
)
 
11

Included in other comprehensive income (loss)
 
4

 
—

Purchases (1)
 
4

 
56

Transfers (2)
 
—

 
31

Balance as of December 31, 2019
 
2,370

 
98

Total net gains (losses)
 
 
 
 
Included in earnings
 
(27
)
 
(87
)
Included in other comprehensive income (loss)
 
(57
)
 
—

Purchases (1)
 
3

 
10

Impairments
 
(173
)
 
—

Balance as of March 31, 2020
 
$
2,116

 
$
21


(1) Purchases in non–marketable equity security include warrants to purchase shares of a private company that vest as certain performance criteria are met during the period.
(2) Transfers include a non-marketable equity security that was previously measured at fair value on a non-recurring basis as of December 31, 2018 for which the Company elected to apply the fair value option during the year ended December 31, 2019. Management’s key inputs and assumptions used to determine an estimate of fair value for this investment is based on an option-pricing model and price of the underlying security in recent financing transactions.
There is significant uncertainty over the collectability of the contractual interest on the Grab investment and as a result the Company has elected to apply a non-accrual policy to this investment. In determining whether a non-accrual policy is appropriate, the Company considered, among other factors, the reasonable possibility of a Grab initial public offering, the ability of Grab to pay the accumulated interest on all preferred securities on or after the redemption date, and the likelihood of a redemption occurring. If
the Company had recorded accrued interest on the Series G preference shares, $34 million and $36 million of additional interest income would have been
Schedule of Securities without Readily Determinable Fair Value
The following table summarizes the total carrying value of the Company’s non-marketable equity securities measured at fair value on a non-recurring basis held as of December 31, 2019 and March 31, 2020 including cumulative unrealized upward and downward adjustments made to the initial cost basis of the securities (in millions):
 
 
As of
 
 
December 31, 2019
 
March 31, 2020
Initial cost basis
 
$
6,075

 
$
6,256

Upward adjustments
 
1,984

 
1,984

Downward adjustments (including impairment)
 
—

 
(1,690
)
Total carrying value at the end of the period
 
$
8,059

 
$
6,550


The following is a summary of unrealized gains and losses from remeasurement (referred to as upward or downward adjustments) recorded in other income (expense), net in the condensed consolidated statements of operations, and included as adjustments to the carrying value of non-marketable equity securities held during the three months ended March 31, 2019 and 2020. The amounts are based on the selling price of newly issued shares of similar preferred stock to new investors using a hybrid method which applies probabilities to possible scenarios valued using the CSE method, and OPM, which contemplates the rights and preferences of the securities the Company holds.
(In millions)
 
Three Months Ended March 31,
 
 
2019
 
2020
Upward adjustments
 
$
—

 
$
—

Downward adjustments (including impairment)
 
—

 
(1,690
)
Total unrealized gain for non-marketable equity securities
 
$
—

 
$
(1,690
)
Schedule of Reconciliation Using Significant Unobservable Inputs, Liabilities
The following table summarizes information about the significant unobservable inputs used in the valuation for the Company’s investment in Didi as of March 31, 2020:
Fair value method
 
Key unobservable input
CSE
 
Market adjustment
 
(20)%
 
 
 
 
 
OPM
 
Volatility
 
39%
 
 
Estimated time to liquidity
 
2.0 years
 
 
Market adjustment
 
(40)%