TheStreet

Broadcom Inc. (AVGO - Get Report) shares traded lower Wednesday after boosted the size of a planned convertible preferred stock sale.

Broadcom said it priced and sold 3.25 million shares of mandatory convertible preferred shares, which carry a dividend payment of 8%, at a price of $1,000 each. The overall size is up from the 3 million shares it planned to sell as late as Tuesday afternoon. Reports suggest the preferred shares could convert into Broadcom stock at a price of between last night's close of 282.31 and $330 each, with Broadcom saying the $3.2 billion in proceeds from the sale will be used to pay down debt, some of it linked to its recent $10.7 billion acquisition of Symantec.

"On the surface, raising capital through what is an effective equity issuance looks odd; Broadcom's stock is inexpensive, and their debt is cheap," said Bernstein analyst Stacy Rasgon. "Hence we suspect the rationale is to keep leverage a bit more in check in front of Symantec, presumably at the request of the rating agencies ... Broadcom has strongly voiced their goal to maintain an investment grade credit rating."

Broadcom shares were marked 3.4% lower at the start of trading Wednesday to change hands at $272.64 each, a move that would extend the stock's six month decline to around 6.5%.

Earlier this month, Broadcom posted stronger-than-expected third quarter earnings but cautioned that a recovery in global semiconductor markets could take longer than forecast.

Broadcom said non-GAAP operating earnings came in at $5.16 per share, with revenues of $5.515 billion, and said it still sees full year earnings of $21.13 per share. However, Broadcom warned that semiconductor solutions demand had "bottomed out but will continue to remain at these levels due to the current uncertain environment.

"The US-China trade dispute is turning into an extended affair with lots of twists and turns in uncertainty," Broadcom CEO Hock Tan said at the time "And we are assuming conditions (are) not going to change from what we're seeing now. And if we make that assumption next year, you probably see a very uncertain 2020."

"But as we sit here right now it appears we have hit bottom at least in the semiconductor -- as it relates to the semiconductor solution side, we have hit bottom ... and we're kind of staying at the bottom."