On September 14, 2017, MercadoLibre, Inc. (the
“Company”) entered into privately negotiated capped call transactions with several financial institutions. The purpose
of the transactions is to manage the future impact on MercadoLibre of conversions of its Convertible Senior Notes due 2019 (the
“notes”).
The capped call transactions were entered into
with several financial institutions (the “option counterparties”). They are expected to cover, subject to anti-dilution
adjustments substantially similar to those applicable to the notes, the total number of shares of MercadoLibre’s common stock
underlying the notes. Upon conversion of the notes, the capped call transactions are expected generally to reduce the potential
dilution to MercadoLibre’s common stock, in the event that the market price per share of MercadoLibre’s common stock,
as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions.
The strike price will be set based on the market price per share of MercadoLibre’s common stock over a reference period and
be subject to certain adjustments substantially similar to those contained in the notes. If, however, the market price per share
of MercadoLibre’s common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the
capped call transactions, there would nevertheless be dilution upon conversion of the notes to the extent of such excess. MercadoLibre
could also use the capped call transactions to partially offset cash payments, in excess of the principal amount of the notes,
that it may elect to make under the terms of the notes, but it does not intend to make that election. If any notes are converted
prior to maturity or MercadoLibre repurchases any notes prior to maturity, a corresponding portion of the capped call transactions
may be terminated for value at the election of MercadoLibre.
MercadoLibre entered into capped call transactions
in June 2014, when it issued the notes, and those transactions remain in effect. The capped call transactions entered into today
are in addition to those previous transactions, and they have a higher strike price and cap price.
MercadoLibre has been advised that market activity
by or on behalf of the option counterparties may affect the market for its common stock. In particular: (1) in connection with
establishing their initial hedge positions with respect to the capped call transactions, the option counterparties expect to purchase
MercadoLibre’s common stock and/or enter into various derivative transactions with respect to MercadoLibre’s common
stock during a specified reference period, (2) from time to time the option counterparties may modify their hedge positions by
entering into or unwinding various derivative transactions with respect to MercadoLibre’s common stock and/or purchasing
or selling MercadoLibre’s common stock or other securities of MercadoLibre in secondary market transactions prior to the
maturity of the notes; and (3) in order to unwind their hedge positions with respect to any exercised or terminated options, the
option counterparties are likely to buy or sell shares of MercadoLibre’s common stock or other securities or instruments
of MercadoLibre, including the notes, in secondary market transactions or unwind various derivative transactions with respect to
such common stock during the relevant valuation period under the capped call transactions, which generally corresponds to the observation
period for the converted notes. Depending on market conditions at the time, these unwind activities could, to the extent the activity
occurs during any observation period related to a conversion of notes, have the effect of increasing or reducing the value of the
consideration that holders of the notes will receive upon conversion of the notes.
The Company is continuing to evaluate future
options, including potential structured repurchase transactions, and may also seek to address the outstanding liability
through other transactions.
Forward-Looking Statements
Any statements herein regarding MercadoLibre,
Inc. that are not historical or current facts are forward-looking statements. These forward-looking statements convey MercadoLibre,
Inc.’s current expectations or forecasts of future events. Forward-looking statements regarding MercadoLibre, Inc. involve
known and unknown risks, uncertainties and other factors that may cause MercadoLibre, Inc.’s actual results, performance
or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking
statements. Certain of these risks and uncertainties are described in the “Risk Factors,” “Forward-Looking Statements”
and “Cautionary Note Regarding Forward-Looking Statements” sections of MercadoLibre, Inc’s quarterly report on
Form 10-Q for the period ended June 30, 2017, its annual report on Form 10-K for the year ended December 31, 2016, and any of MercadoLibre,
Inc.’s other applicable filings with the Securities and Exchange Commission. Unless required by law, MercadoLibre, Inc. undertakes
no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date hereof.