Shares of EZchip Semiconductor Ltd. fell Thursday after the Israeli networking chip maker priced a stock offering far below the shares' previous value.
EZchip late Wednesday priced its secondary offering at $10.50 for each common share. The stock ended Wednesday's regular session at $11.55.
The offering is for 3.9 million common shares, of which 712,600 shares are being sold by the company and the rest are being unloaded by funds affiliated with Goldman, Sachs & Co. and JK&B Capital.
In case there's greater demand than expected for the stock, the selling shareholders also granted underwriter Jefferies & Co. an option to buy another 472,500 shares to sell. EZchip gave Jefferies an option to purchase 107,000 additional shares.
If the overallotment of shares are sold, the selling shareholders will be cashing out their entire holdings in EZchip.
EZchip expects to receive $7.1 million from the stock sale and selling shareholders should get $31.6 million before expenses, according to a Securities and Exchange Commission filing.
EZchip also said its current and former employees will exchange their stock and options of EZchip Technologies Ltd., a majority owned subsidiary, for shares of EZchip Semiconductor and cash.
Proceeds from the stock offering will be used to pay cash to employees who exchange their EZchip Technologies shares so they can pay taxes incurred from the exchange.
After the exchange, EZchip will own all of EZchip Technologies.
The offering is scheduled to close on Dec. 22.
Shares of EZchip slid 76 cents, or 6.6 percent, to $10.79 in midday trading. The stock has traded between $9.95 and $18.12 in the past 52 weeks.