Item 8.01. Other Events.
On November 7, 2018, 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. 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.
In connection with MercadoLibre’s 2.25% Convertible
Senior Notes due 2019 (the “2019 Notes”), MercadoLibre entered into capped call transactions with certain financial
institutions, including in March 2018 (the “March 2018 Capped Call Transactions”). On November 7, 2018, MercadoLibre
entered into agreements with the counterparties to the March 2018 Capped Call Transactions to terminate a number of options under
these transactions such that the options that remain outstanding under the March 2018 Capped Call Transactions cover a number of
shares approximately equal to the number of shares underlying the outstanding 2019 Notes. MercadoLibre has been advised that, in
connection with such termination of the March 2018 Capped Call Transactions and the related unwinding of the existing hedge position
of the counterparties to such transactions with respect to such transactions, such counterparties and/or their respective affiliates
expect to sell shares of MercadoLibre’s common stock in secondary market transactions, and/or enter into or unwind various
derivative transactions with respect to MercadoLibre’s common stock. This activity could decrease (or reduce the size of
any increase in) the market price of MercadoLibre’s common stock at the time and it could decrease (or reduce the size of
any increase in) the market value of the 2019 Notes and the 2028 Notes. In connection with these transactions, MercadoLibre expects
to receive payments from the counterparties in amounts that will be set based on the market price per share of MercadoLibre’s
common stock over a reference period.
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 annual report on
Form 10-K for the year ended December 31, 2017 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.