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Equity Investments
 12 Months Ended
Jul. 31, 2024
Cash and Cash Equivalents [Abstract]  
Equity Investments

Note 8—Equity Investments

 

Equity investments consist of the following:

 

July 31
(in thousands)		  2024   2023 
Zedge, Inc. Class B common stock, 42,282 shares at July 31, 2024 and 2023  $153   $89 
Rafael Holdings, Inc. Class B common stock, 278,810 shares at July 31, 2024 and 2023   416    558 
Other marketable equity securities   70    1,497 
Fixed income mutual funds   4,370    4,054 
Current equity investments  $5,009   $6,198 
           
Visa Inc. Series C Convertible Participating Preferred Stock (“Visa Series C Preferred”)  $695   $1,263 
Visa Inc. Series A Convertible Participating Preferred Stock (“Visa Series A Preferred”)   877    — 
Convertible preferred stock—equity method investment   1,338    2,784 
Hedge funds   2,883    3,002 
Other   725    2,825 
Noncurrent equity investments  $6,518   $9,874 

 

Howard S. Jonas is the Vice-Chairman of the Board of Directors of Zedge.

 

In June 2016, upon the acquisition of Visa Europe Limited by Visa, Inc. (“Visa”), IDT Financial Services received 1,830 shares of Visa Series C Preferred among other consideration. In July 2024 and July 2022, in connection with Visa’s mandatory release assessments, the Company received 33 shares and 58 shares, respectively, of Visa’s Series A Preferred. In August 2024, the 33 shares of Visa Series A Preferred were converted into 3,300 shares of Visa Class A common stock, which the Company sold for $0.9 million. In August 2022, the 58 shares of Visa Series A Preferred were converted into 5,800 shares of Visa Class A common stock, which the Company sold for $1.3 million.

 

The changes in the carrying value of the Company’s equity investments without readily determinable fair values for which the Company elected the measurement alternative was as follows:

 

Year ended July 31
(in thousands)		  2024   2023   2022 
Balance, beginning of period  $1,632   $1,501   $2,743 
Upward adjustment   130    —    — 
Redemption for Visa Series C Preferred mandatory release assessment   (877)   —    (1,230)
Purchase   —    —    100 
Adjustment for observable transactions involving a similar investment from the same issuer   309    131    (103)
Redemptions   (230)   —    (9)
Impairments   —    —    — 
BALANCE, END OF PERIOD  $964   $1,632   $1,501 

 

 

The Company adjusted the carrying value of the shares of Visa Series C Preferred it held based on the fair value of Visa Class A common stock, including a discount for lack of current marketability, which is classified as “Adjustment for observable transactions involving a similar investment from the same issuer” in the table above. The Certificate of Designation with respect to the shares of Visa Series C Preferred restricts the transferability of the shares, there is no public market for the shares, and none is expected to develop. The shares become fully convertible into shares of Visa Class A common stock in June 2028. In addition, in connection with the acquisition of Regal Bancorp by SR Bancorp, the Company received cash of $0.2 million in fiscal 2024 in exchange for its shares of Regal Bancorp common stock.

 

Unrealized gains and losses for all equity investments measured at fair value included the following:

 Schedule of Unrealized Gains (losses) Gains for All Equity Investments

Year ended July 31
(in thousands)		  2024   2023   2022 
Net gains (losses) recognized during the period on equity investments  $229   $(2,613)  $(19,248)
Less: net gains recognized during the period on equity investments sold during the period   130    18    10 
Unrealized gains (losses) recognized during the period on equity investments still held at the reporting date  $99   $(2,631)  $(19,258)

 

The unrealized losses and gains for all equity investments measured at fair value in the table above included the following:

 

Year ended July 31
(in thousands)		  2024   2023   2022 
Unrealized (losses) gains recognized during the period on equity investments:               
Rafael Class B common stock  $(142)  $(7)  $(14,101)
Zedge Class B common stock  $64   $(28)  $(533)

 

Equity Method Investment

 

The Company has an investment in shares of convertible preferred stock of a communications company (the equity method investee, or “EMI”). As of July 31, 2024 and 2023, the Company’s ownership was 33.4% and 33.3%, respectively, of the EMI’s outstanding shares on an as converted basis. The Company accounts for this investment using the equity method since the Company can exercise significant influence over the operating and financial policies of the EMI but does not have a controlling interest.

 

The Company determined that on the dates of the acquisitions of the EMI’s shares, there were differences between its investment in the EMI and its proportional interest in the equity of the EMI of an aggregate of $8.2 million, which represented the share of the EMI’s customer list on the dates of the acquisitions attributed to the Company’s interest in the EMI. These basis differences are being amortized over the 6-year estimated life of the customer list. In the accompanying consolidated statements of income, amortization of equity method basis difference is included in the equity in the net loss of investee, which is recorded in “Other expense, net” (see Note 18).

 

As of April 6, 2023, the Company was the holder of secured promissory notes made by the EMI in exchange for loans of an aggregate of $4.0 million including accrued interest. The notes provided for interest on the principal amount at 15% per annum payable monthly. The notes were due and payable in February 2023 and April 2023. On April 6, 2023, in accordance with an Agreement and Plan of Merger dated as of April 5, 2023, the EMI merged with and into its subsidiary, with the subsidiary being the surviving corporation. Effective with the merger, the principal and accrued interest of the EMI’s secured promissory notes was converted into shares of the EMI’s convertible preferred stock.

 

 

The following table summarizes the change in the balance of the Company’s equity method investment:

 Summary of Changes in Equity Method Investments

Year ended July 31
(in thousands)		  2024   2023   2022 
Balance, beginning of period  $2,784   $1,001   $2,901 
Purchase of convertible preferred stock   2,017    840    1,051 
Conversion of secured promissory notes into convertible preferred stock   —    4,038    — 
Equity in the net loss of investee   (2,093)   (2,153)   (2,224)
Amortization of equity method basis difference   (1,370)   (942)   (727)
BALANCE, END OF PERIOD  $1,338   $2,784   $1,001 

 

As of August 22, 2024, the EMI’s shareholders including the Company agreed to purchase additional shares of the EMI’s convertible preferred stock. The Company subscribed to purchase additional shares through January 2025 for an aggregate of $0.9 million. In August 2024, the Company paid $0.4 million to purchase additional shares.