Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Measurements

11. Fair Value Measurements

Assets and liabilities measured at fair value are classified into the following categories:

•

Level 1: Quoted market prices in active markets for identical assets or liabilities.

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Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

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Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

We classify our cash equivalents and marketable securities within Level 1 or Level 2 because we use quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value.

The following tables set forth our financial assets as of September 30, 2022 and December 31, 2021 that are measured at fair value on a recurring basis during the period:

	September 30, 2022
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Estimated Fair Value
	(in thousands)
Cash	$	1,805,384	$	—	$	—		$	1,805,384
Level 1 securities:
U.S. government securities		1,675,064		20		(13,648	)		1,661,436
U.S. government agency securities		59,047		14		(149	)		58,912
Publicly traded equity securities ⁽¹⁾		95,406		21,453		—			116,859
Level 2 securities:
Corporate debt securities		279,520		7		(2,429	)		277,098
Commercial paper		336,741		—		—			336,741
Certificates of deposit		172,524		—		(2	)		172,522
Total	$	4,423,686	$	21,494	$	(16,228	)	$	4,428,952

(1)

In the second quarter of 2022, we reclassified a strategic investment from Level 3 to Level 1 at its fair value using the beginning-of-period approach, following the commencement of public market trading of the investment during the period (a portion of which was subject to short-term lock-up restrictions as of September 30, 2022).

	December 31, 2021
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Estimated Fair Value
	(in thousands)
Cash	$	1,966,966	$	—	$	—		$	1,966,966
Level 1 securities:
U.S. government securities		811,092		1		(1,454	)		809,639
U.S. government agency securities		77,409		1		(8	)		77,402
Publicly traded equity securities		71,139		122,064		—			193,203
Level 2 securities:
Corporate debt securities		143,124		—		(207	)		142,917
Commercial paper		422,328		—		(1	)		422,327
Certificates of deposit		80,431		—		—			80,431
Total	$	3,572,489	$	122,066	$	(1,670	)	$	3,692,885

We held investments in publicly traded companies with an aggregate carrying value of $116.9 million and $193.2 million as of September 30, 2022 and December 31, 2021, respectively, recorded as marketable securities. We recorded total gains of $76.2 million and total losses of $79.8 million related to these investments for the three and nine months ended September 30, 2022, respectively, within other income (expense), net on our consolidated statements of operations. Unrealized gains related to publicly traded equity securities still held as of September 30, 2022 were $53.5 million for the three months ended September 30, 2022 and unrealized losses were $69.7 million for the nine months ended September 30, 2022.

Gross unrealized losses on marketable debt securities were not material for the three and nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, we considered any decreases in fair value on our marketable debt securities to be driven by factors other than credit risk, including market risk. As of September 30, 2022, $0.2 million of our total $2.4 billion in marketable debt securities have contractual maturities between one and five years. All other marketable debt securities have contractual maturities less than one year.

We carry the Convertible Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets and present the fair value for disclosure purposes only. As of September 30, 2022, the fair value of the 2025 Notes, the 2026 Notes, the 2027 Notes, and the 2028 Notes was $262.6 million, $725.6 million, $798.0 million, and $1.0 billion, respectively. As of December 31, 2021, the fair value of the 2025 Notes, the 2026 Notes, and the 2027 Notes was $650.1 million, $1.9 billion, and $1.1 billion, respectively. The estimated fair value of the Convertible Notes, which are classified as Level 2 financial instruments, was determined based on the estimated or actual bid prices of the Convertible Notes in an over-the-counter market on the last business day of the period.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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