Item 8.01. Other Events.
On August 12, 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. MercadoLibre entered into an additional capped call transaction
in June 2020. All of 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
reports on Form 10-Q for the quarters ended March 31, 2020, and June 30, 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.
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