Groupon 2013 Annual Report Download - page 112

GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
104
6. INVESTMENTS
The following table summarizes the Company's investments (dollars in thousands):
December 31,
2013
Percent
Ownership of
Voting Stock
December 31,
2012
Percent
Ownership of
Voting Stock
Cost method investments:
Life Media Limited (F-tuan) common shares ...... $ — $ 34,982 16%
Other cost method investments ............................ 15,788 6% to 19% 1,867 6% to 19%
Total cost method investments .......................... 15,788 36,849
Equity method investments..................................... 1,690 21% to 50% 1,734 21% to 50 %
Total cost and equity method investments......... 17,478 38,583
Available-for-sale securities:
Life Media Limited (F-tuan) preferred shares(1) .. — 19% 42,539 3%
Convertible debt securities................................... 3,174 3,087
Total available-for-sale securities...................... 3,174 45,626
Total investments.................................................... $ 20,652 $ 84,209
(1) F-tuan preferred shares outstanding as of December 31, 2012 have been reclassified to the available-for-sale category in this table. See further
discussion below regarding the classification of the F-tuan preferred shares.
Investments in E-Commerce and Life Media (F-tuan)
In January 2011, the Company acquired 40% of the ordinary shares of E-Commerce King Limited ("E-Commerce"), a
company organized under the laws of the British Virgin Islands, in exchange for $4.0 million. The Company entered into the joint
venture along with Rocket Asia GmbH & Co. KG ("Rocket Asia"). Rocket Asia acquired 10% of the ordinary shares in E-
Commerce. E-Commerce subsequently established a wholly-owned foreign enterprise that created a domestic operating company
headquartered in Beijing, China.
On July 31, 2011, the Company entered into an agreement to purchase additional interests in E-Commerce from Rocket
Asia for an acquisition price of $45.2 million, consisting of 2,908,856 shares of non-voting common stock. The investment increased
the Company's ownership from 40% to 49%.
Throughout 2011 and 2012, the Company made cash investments in E-commerce for an aggregate amount of $32.9
million. As of May 31, 2012, the Company's ownership in E-Commerce was 49.8%.
In June 2012, Life Media Limited ("F-tuan"), an exempted company incorporated under the laws of the Cayman Islands
with operations in China, acquired the Company's 49.8% interest in E-Commerce. In exchange for its interest in E-Commerce
and an additional $25.0 million of cash consideration, the Company received a 19.1% interest in F-tuan in the form of common
and Series E preferred shares. The Company recognized a non-operating gain of $56.0 million as a result of the transaction, which
is included within "Other income, net" on the consolidated statement of operations for the year ended December 31, 2012. The
gain represented the excess of the fair value of the Company's 19.1% investments in F-tuan over the carrying value of its E-
Commerce investment as of the date of the transaction and the $25.0 million of cash consideration.
In August 2013, the Company entered into an exchange transaction with F-tuan whereby it received newly issued shares
of Series F preferred stock in exchange for all shares of F-tuan common stock previously held by the Company and $8.0 million
of cash consideration, which was paid in two installments of $6.5 million and $1.5 million in August and October 2013, respectively.
The transaction was recorded at cost. The Company’s investments in F-tuan following this transaction are in the form of Series E
and Series F preferred shares. Those preferred shares rank pari passu with certain other classes of F-tuan’s outstanding preferred
stock and have an aggregate liquidation preference of $85.5 million. The Company’s voting interest in F-tuan remained 19.1%
after the transaction.