Magma Design Automation Inc. has a market cap of $167.4 million; its shares were traded at around $3.17 with and P/S ratio of 1.4. LAVA is in the portfolios of Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC.
Highlight of Business Operations:We recorded a gain of $38,000 for the three months ended August 1, 2010, which is reported in Valuation gain, net in the condensed consolidated statement of operations. For the three months ended August 2, 2009, we recorded a gain of $0.8 million for the ARS. This gain was offset by losses related to the purchased put option of $0.6 million.
On July 2, 2010 we exercised the purchased put option and liquidated the $16.8 million ARS. A gain of $38,000 on liquidation is recorded in valuation gain, net in the consolidated statements of operation for the three months ended August 1, 2010.
Based on the Level 3 valuation and the transfer of the ARS from the available-for-sale category to the trading category, we recorded an other-than-temporary gain of $0.8 million in valuation gain, net in the consolidated statement of operations for the three months ended August 2, 2009. This gain was offset by losses related to the purchased put option of $0.6 million.
We review all of our investments periodically for impairment; however, for non-marketable equity securities, the fair value analysis requires significant judgment. This analysis includes assessment of each investees financial condition, the business outlook for its products and technology, its projected results and cash flows, the likelihood of obtaining subsequent rounds of financing and the impact of any relevant contractual equity preferences held by us or others. If an investee obtains additional funding at a valuation lower than our carrying amount, we presume that the investment is other than temporarily impaired, unless specific facts and circumstances indicate otherwise, such as when we hold contractual rights that give us a preference over the rights of other investors. As the equity markets have experienced volatility over the past few years, we have experienced substantial impairments in our portfolio of non-marketable equity securities. If certain equity market conditions do not improve, as companies within our portfolio attempt to raise additional funds, the funds may not be available to them, or they may receive lower valuations, with more onerous investment terms than in previous financings, and the investments will likely become impaired. However, we are not able to determine at the present time which specific investments are likely to be impaired in the future, or the extent or timing of individual impairments. We recorded impairment charges related to these non-marketable equity investments of $34,000 and $0.1 million, respectively, for the three months ended August 1, 2010 and August 2, 2009.
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