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INVESTMENTS | 9 Months Ended
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Sep. 30, 2021
Investments, Debt and Equity Securities [Abstract] |
INVESTMENTS | INVESTMENTS The following table summarizes, by major security type, the Company's investments at September 30, 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 |  | $ | 525 |  |  | $ | — |  |  | $ | (3) |  |  | $ | 522 |
Long-term investments: |  |  |  |  |  |  |  |
Investments in private companies: |  |  |  |  |  |  |  |
Debt securities |  | $ | 200 |  |  | $ | 130 |  |  | $ | — |  |  | $ | 330 |
Equity securities |  | 66 |  |  | 3 |  |  | — |  |  | 69 |
Other long-term investments: |  |  |  |  |  |  |  |
Equity securities |  | 963 |  |  | 2,115 |  |  | (194) |  |  | 2,884 |
Total |  | $ | 1,229 |  |  | $ | 2,248 |  |  | $ | (194) |  |  | $ | 3,283 |
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 equity securities with readily determinable fair values and equity securities without readily determinable fair values. Equity securities with readily determinable fair values 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. Such investments are also required to be measured at fair value as of the date of certain observable transactions for the identical or a similar investment of the same issuer. During the nine months ended September 30, 2020, the Company realized $2.2 billion in cash from the sales and maturities of its investments in government and corporate debt securities. Investments in Trip.com Group At September 30, 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 Sheets at September 30, 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 "Short-term investments" or "Long-term investments," as applicable. 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 nine months ended September 30, 2020, the Company sold its entire investment in Trip.com Group American Depositary Shares ("ADSs"), with a cost basis of $655 million, for $525 million. "Other income (expense), net" in the Unaudited Consolidated Statement of Operations for the nine months ended September 30, 2020 includes a net realized loss of $201 million related to the sale of Trip.com Group ADSs. 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 equity securities with readily determinable fair values since Meituan's initial public offering in 2018. The investment had a fair value of $2.6 billion and $3.1 billion at September 30, 2021 and December 31, 2020, respectively, which is included in "Long-term investments" in the Consolidated Balance Sheets. Net unrealized losses of $772 million and $509 million for the three and nine months ended September 30, 2021, respectively, and net unrealized gains of $727 million and $1.4 billion for the three and nine months ended September 30, 2020, respectively, related to this investment, are included in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations. Investment in DiDi Global Inc. In 2018, the Company invested $500 million in preferred shares of DiDi Global Inc. ("DiDi"). The investment was classified as equity securities without readily determinable fair values and measured at cost less impairment, if any. The investment was also required to be measured at fair value as of the date of certain observable transactions for the identical or a similar investment issued by DiDi. In June 2021, DiDi announced the pricing of its initial public offering of ADSs, with four ADSs representing one Class A ordinary share, and its ADSs began publicly trading on the New York Stock Exchange. As a result of DiDi's initial public offering, the Company's investment was converted to Class A ordinary shares and classified as equity securities with readily determinable fair values. In connection with the initial public offering, the Company entered into a lock-up agreement with the underwriters. The lock-up agreement expires in December 2021 and restricts the sale, transfer or disposal by other means of the Company's investment in DiDi. The investment had a fair value of $306 million at September 30, 2021, which is included in "Long-term investments" in the Company's Consolidated Balance Sheet. The Company recorded unrealized losses of $249 million and $94 million in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2021, respectively. During the three months ended March 31, 2020, the Company recognized an impairment charge of $100 million to the investment due to the impact of the COVID-19 pandemic (see Note 1) that resulted in an adjusted carrying value of $400 million at each of March 31, 2020, December 31, 2020 and March 31, 2021 (see Note 6). Investments in Private Companies Equity Securities without Readily Determinable Fair Values The Company had $66 million and $552 million invested in equity securities of private companies at September 30, 2021 and December 31, 2020, respectively, including $51 million invested in Yanolja Co., Ltd. ("Yanolja"). These investments are measured at cost less impairment, if any. Such investments are also required to be measured at fair value as of the date of certain observable transactions for the identical or a similar investment of the same issuer. These investments are included in "Long-term investments" in the Company's Consolidated Balance Sheets. The investment balance at December 31, 2020 includes the Company's investment in DiDi, which was reclassified as equity securities with readily determinable fair values as disclosed above. In July 2021, Yanolja announced a new round of funding into the company. The new round of funding and certain other transactions in the equity securities of Yanolja were completed in October 2021. As a result of these observable transactions, the Company will measure its investment in Yanolja at fair value and expects that it will record an unrealized gain, before tax, of approximately $250 million during the three months ending December 31, 2021. Debt Securities The Company had $200 million invested in preferred shares of Grab Holdings Inc. ("Grab"), with an estimated fair value of $330 million and $200 million at September 30, 2021 and December 31, 2020, respectively (see Note 6). 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 its 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. In April 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 "Grab Transaction"). 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 connection with the proposed transaction, the Company has entered into a voting support and lock-up agreement with Grab. The voting support and lock-up agreement, among other things, restricts the sale or transfer of certain of the Company's shares in Grab for specified periods.

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