Latin America Equity Issue: MercadoLibre’s US$1.15bn accelerated bookbuild

IFR Awards 2019
3 min read
Stephen Lacey

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MercadoLibre fueled its transformation from e-commerce pureplay to integrated payments and fulfilment platform with a US$2bn fundraising that capitalised on appeal from both institutional and strategic investors.

Goldman Sachs, JP Morgan and Morgan Stanley sewed up the funding in just one day in March, placing 2.1m new shares on a Monday evening at US$480 apiece, virtually flat to market despite a 7% run-up in the stock over the one-day marketing period. The full exercise of the greenshoe took proceeds up to US$1.15bn.

Simultaneously PayPal invested US$750m in a private placement and Dragoneer Investments another US$100m in the form of convertible preferred stock, both announced on the launch of the public stock sale but agreed to well before.

“We were able to align the transactions so that the moment we announced the [public offering] it all came together,” said Santiago Rubin, head of LatAm TMT equity origination at Goldman Sachs. “We did a parallel track of getting the company ready for a follow-on offering and private placement route to allow PayPal and Dragoneer to do their due diligence.”

The value-add of strategic and financial backing saw MercadoLibre close the following day at US$483.48, valuing the company at US$24bn. In August the stock traded as high as US$698.98 having begun the year below US$300.

“In the fourth quarter of 2018, we began working with our bankers, primarily with the folks at Goldman, on a capital raise for our strategic initiatives,” said CFO Pedro Ant. “We were always aware that there was the potential to access public markets.

“Because of the strong focus on building out the payments products we entertained the notion of raising some of that capital from a strategic investor.”

Dragoneer, an early-stage backer dating to MercadoLibre’s IPO in 2007, was enlisted to vet strategic partners, helping to facilitate meetings with PayPal and other global payments providers.

PayPal – whose former parent eBay had sold out of MercadoLibre in 2016 – bought restricted stock at a 7.2% discount to the public offer and in the process the competitor became a partner. Dragoneer’s convertible preferred, meanwhile, pays a 4% dividend.

MercadoLibre would go on to spend US$1.7bn in the first nine months of the year on technology and marketing to support the rollout of its payments and logistic networks, not only in Brazil and Argentina but in Mexico, Colombia and Chile as well. The spending ramp caused operating losses to elevate to US$84.3m in the nine months.

In the third quarter, US$7.6bn crossed the company’s payments network, US$3.6bn was transacted on its e-commerce platform, and 81.2m goods were shipped through its fulfillment service. Those businesses contributed to a 69.7% year-on-year rise in net revenue to US$603m.

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