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(7)����Investments in Available-for-Sale Securities and Other Cost Investments

All marketable equity and debt securities held by the Company are classified as available-for-sale (“AFS”) and are carried at fair value generally based on quoted market prices. GAAP permits entities to choose to measure many financial instruments, such as AFS securities, and certain other items at fair value and to recognize the changes in fair value of such instruments in the entity’s statement of operations. The Company previously had entered into economic hedges for certain of its AFS securities (although such instruments were not accounted for as fair value hedges by the Company). Changes in the fair value of those economic hedges were reflected in the Company’s statement of operations as unrealized gains (losses). In order to better match the changes in fair value of the subject AFS securities and the changes in fair value of the corresponding economic hedges in the Company’s financial statements, the Company elected the fair value option for certain of its AFS securities (“Fair Value Option Securities”). Accordingly, changes in the fair value of Fair Value Option Securities, as determined by quoted market prices, are reported in realized and unrealized gains (losses) on financial instruments in the accompanying consolidated statements of operations.

Investments in AFS securities, including Fair Value Option Securities separately aggregated, and other cost investments are summarized as follows:

Pandora

On September��22, 2017, a subsidiary of SIRIUS��XM completed a $480��million investment in newly issued Series��A convertible preferred stock of Pandora (the “Series��A Preferred Stock”). Pandora operates an internet-based music discovery platform, offering a personalized experience for listeners. The Series��A preferred stock, including accrued but unpaid dividends, represents an approximate 19% interest in Pandora’s currently outstanding common stock and an approximate 16% interest on an as-converted basis.

The Series��A Preferred Stock is convertible at the option of the holders at any time into shares of common stock of Pandora (“Pandora Common Stock”) at an initial conversion price of $10.50 per share of Pandora Common Stock and an initial conversion rate of 95.2381 shares of Pandora Common Stock per share of Series��A Preferred Stock, subject to certain customary anti-dilution adjustments. Holders of the Series��A Preferred Stock are entitled to a cumulative dividend at the rate of 6.0% per annum, payable quarterly in arrears, if and when declared. Any conversion of Series��A Preferred Stock may be settled by Pandora, at its option, in shares of Pandora Common Stock, cash or any combination thereof. However, unless and until Pandora’s stockholders have approved the issuance of greater than 19.99% of the outstanding Pandora Common Stock, the Series��A Preferred Stock may not be converted into more than 19.99% of Pandora’s outstanding Pandora Common Stock as of June��9, 2017.

The investment includes a mandatory redemption feature on any date from and after September��22, 2022 and therefore the financial instrument has been treated as a debt security. As the investment includes a conversion option, SIRIUS��XM has elected to account for this investment under the fair value option. Any gains (losses) associated with the change in fair value will be recognized in realized and unrealized gains (losses) on financial instruments, net in the consolidated statements of operations. A $17��million unrealized loss was recognized during the year ended December��31, 2017 on the investment in Pandora, including transaction costs.

Pursuant to an Investment Agreement with Pandora, SIRIUS��XM has appointed three of its senior executives or members of its Board of Directors to Pandora’s Board of Directors, one of whom serves as the Chairman of Pandora’s Board of Directors. SIRIUS��XM’s right to designate directors will fall away once SIRIUS��XM and its affiliates fail to beneficially own shares of Series��A Preferred Stock and/or Pandora Common Stock issued upon conversion thereof equal to (on an as-converted basis) at least 50% of the number of shares of Pandora Common Stock issuable upon conversion of the Series��A Preferred Stock purchased under the Investment Agreement. Following the earlier to occur of (i)��September��22, 2019 and (ii)��the date on which SIRIUS��XM and its affiliates fail to beneficially own shares of Series��A Preferred Stock and/or Pandora Common Stock that were issued upon conversion of Series��A Preferred Stock equal to (on an as-converted basis) at least 75% of the number of shares of Pandora Common Stock issuable upon conversion of the Series��A Preferred Stock purchased under the Investment Agreement, SIRIUS��XM has the right to designate only two directors.

Unrealized Holding Gains and Losses recorded in Accumulated other comprehensive earnings (loss)

There were no unrealized holding gains or losses related to investments in AFS securities at December��31, 2017 or 2016.