Updated for latest share price.

NEW YORK (

TheStreet

) --

Citigroup

(C) - Get Report

shares slumped on massive volume Thursday after the bank priced its huge stock offering well below its expected target, and as the federal government took pause in immediately exiting its stake in the banking giant.

Citigroup said late Wednesday it would sell 5.4 billion shares of common stock for $3.15 apiece, netting the company $17 billion. Citigroup also is selling 35 million tangible equity units for $100 each, which is expected to generate $3.5 billion, or $2.8 billion counted as equity.

Citigroup shares were down 8.6% to $3.16 in morning trades. Volume was already above 1.6 billion, more than three times the issue's trailing three-month daily average of about 458 million.

Citigroup said the Treasury Department decided not to sell any of its shares in connection with the company's offering, disappointing investors. Treasury intends to "extend its lock-up period on the sale of its 7.7 billion share common equity stake to 90 days from 45 days after the completion of this offering," Citigroup said.

Completing the offerings will allow Citigroup to repay $20 billion of federal bailout funds and terminate a loss-sharing agreement the government, reached after the company received an earlier $25 billion infusion of capital through the Troubled Asset Relief Program. Only

Bank of America

(BAC) - Get Report

,

JPMorgan Chase

TST Recommends

(JPM) - Get Report

and

Wells Fargo

(WFC) - Get Report

received as much under the initial round of TARP. Citigroup said repaying the extra $20 billion allows to no longer be considered a recipient of "exceptional financial assistance" under TARP.

The $3.15 a share pricing is 10 cents less than what the government paid when it bought its 34% stake in Citigroup during the financial crisis. Earlier in the day,

CNBC

reported that the bank's underwriters would complete the pricing Wednesday at $3.30 to $3.35 a share.

On Tuesday, Citigroup ran into trouble with Abu Dhabi's sovereign wealth fund, which alleged "fraudulent misrepresentations" in connection with the stock sale.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.