On June 1, 2020, MercadoLibre, Inc. (the
“Company”) entered into privately negotiated capped call transactions having an expiration date of August 21, 2023
with certain financial institutions (collectively, the “Counterparties” and such transactions, the “Capped Call
Transactions”). The purpose of the Capped Call Transactions is to manage the future impact on the Company of conversions
of its outstanding 2.00% Convertible Senior Notes due 2028 (the “2028 Notes”).
The Capped Call Transactions cover, subject
to anti-dilution adjustments substantially similar to those applicable to the 2028 Notes, the same number of shares of MercadoLibre’s
common stock initially underlying the 2028 Notes. In addition, to the extent the 2028 Notes remain outstanding at the expiration
of the Capped Call Transactions, MercadoLibre may seek to extend the expiration of the Capped Call Transactions or enter into new
capped call transactions. The Capped Call Transactions are expected generally to reduce potential dilution to MercadoLibre’s
common stock upon any conversion of the 2028 Notes prior to the expiration date of the Capped Call Transactions and/or partially
offset any cash payments MercadoLibre is required to make in excess of the principal amount of any such converted 2028 Notes, as
the case may be, 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 as adjusted pursuant to the anti-dilution
adjustments. 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 2028 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 2028 Notes, that it may elect to make under the terms of the 2028 Notes, but
it does not intend to make that election. In addition, to the extent any observation period for any converted 2028 Notes does not
correspond to the period during which the market price of MercadoLibre’s common stock is measured under the terms of the
Capped Call Transactions, there could also be dilution and/or a reduced offset of any such cash payments as a result of the different
measurement periods. The initial strike price and cap price will be set based on the market price per share of MercadoLibre’s
common stock over a reference period.
MercadoLibre entered into capped call transactions
in August 2018 when it issued the 2028 Notes, and entered into additional capped call transactions in November 2018 and June 2019
and amended the November 2018 capped call transactions in November 2019. These transactions remain in effect. The Capped Call Transactions
entered into today are in addition to those previous transactions, and they are expected to have a higher strike price and cap
price.
MercadoLibre has been advised that, in connection
with establishing their initial hedges of the Capped Call Transactions, the Counterparties or their respective affiliates may purchase
shares of MercadoLibre’s common stock and/or enter into various derivative transactions with respect to MercadoLibre’s
common stock. This activity could increase (or reduce the size of any decrease in) the market price of MercadoLibre’s common
stock or the 2028 Notes at that time.
In addition, MercadoLibre has been advised
that the Counterparties or their respective affiliates 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 final settlement of the Capped Call Transactions.
This activity could also cause or avoid an increase or a decrease in the market price of MercadoLibre’s common stock or the
2028 Notes, which could affect the ability of holders of the 2028 Notes to convert the 2028 Notes and, to the extent the activity
occurs during any observation period related to a conversion of 2028 Notes, it could affect the number of shares and value of the
consideration that holders of the 2028 Notes will receive upon conversion of the 2028 Notes.
The options MercadoLibre holds under the
Capped Call Transactions will be exercised on their expiration date, and in the event MercadoLibre repurchases, exchanges or redeems
any 2028 Notes or any 2028 Notes are converted prior to the relevant valuation period under the Capped Call Transactions, a corresponding
portion of the Capped Call Transactions may be terminated at MercadoLibre’s option. Upon such termination, MercadoLibre expects
to receive from the Counterparties either a number of shares of MercadoLibre’s common stock with an aggregate market value
equal to, or an amount of cash equal to, the value of the Capped Call Transactions or portion thereof, as the case may be, being
early terminated, subject to the terms of the Capped Call Transactions. MercadoLibre has been advised that the Counterparties or
their respective affiliates, in order to unwind their hedge positions with respect to those exercised or terminated options, are
likely to buy or sell shares of MercadoLibre’s common stock or other securities or instruments of MercadoLibre, including
the 2028 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 may correspond to any observation period for any converted
2028 Notes. These unwind activities could have the effect of increasing or decreasing the trading price of MercadoLibre’s
common stock and, to the extent the activity occurs during any observation period related to a conversion of 2028 Notes, could
have the effect of increasing or reducing the value of the consideration that holders of the 2028 Notes will receive upon conversion
of the 2028 Notes.
The Capped Call Transactions are separate
transactions entered into by and between MercadoLibre and the Counterparties and are not part of the terms of the 2028 Notes. Holders
of the 2028 Notes will not have any rights with respect to Capped Call 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 Statement Regarding Forward-Looking Statements” sections of MercadoLibre, Inc.’s annual report
on Form 10-K for the year ended December 31, 2019 and quarterly report on Form 10-Q for the quarter ended March 31, 2020, 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.