Mellanox Drops Most in a Month on Roles Concern: Tel Aviv Mover

Mellanox Technologies Ltd. tumbled the most this month in Tel Aviv after U.S.-traded shares of the Israeli maker of data-transfer technology fell and amid concern over the lack of a decision about splitting the roles of chairman and chief executive officer.

Shares of the Yokneam Elit-based technology developer sank 5.2 percent, its biggest drop since April 28, to 196 shekels, or the equivalent of $52.96, at the close in Tel Aviv. Mellanox led declines on the benchmark TA-25 Index, which fell 1.4 percent. The stock lost 2.5 percent this week.

Mellanox on May 20 postponed its annual meeting for a second time until June 3. Investors will learn the results of a vote on whether to appoint Eyal Waldman as both chairman and CEO for another three-year term, according to a proxy statement last week. GAM U.K. Ltd. and Oberweis Asset Management Inc. are calling for the roles to be separated. Waldman told Bloomberg on May 17 that large Israeli investors support the split while large investors in the U.S. support the dual role.

“The share is falling because of the uncertainty around the vote to split the chairman and chief executive roles,” Mili Shendler, technology analyst at IBI-Israel Brokerage & Investments Ltd., said by phone today from Tel Aviv. She started coverage yesterday with a neutral rating and a $61 price estimate.

Mellanox shares have dropped almost 60 percent in Tel Aviv from last year’s peak of 479.9 shekels, as the company issued sales forecasts below analyst estimates for three reporting periods. The disappointing forecasts led to calls to separate the roles.

Israel De-listing

Second-quarter sales will be as much as $97.5 million, Mellanox said April 24, trailing a $108 million average of 14 analysts’ estimates compiled by Bloomberg. That follows the company’s first-quarter revenue forecast on Jan. 23, which was as much as 48 percent below estimates. Earlier in January, Mellanox cut its fourth-quarter revenue outlook on weaker demand and a product glitch.

On May 20 Waldman said he is considering de-listing Mellanox shares from the Tel Aviv bourse because of over regulation. Mellanox has the seventh-biggest weighting on the equities benchmark TA-25 index, according to data compiled by Bloomberg. Tighter regulation aimed at increasing transparency and tightening supervision were among the factors contributing to a decline in the number of companies trading on the Tel Aviv Stock Exchange, the central bank said in a March 12 press release.

The possibility of the de-listing “is also putting pressure on the shares,” Shendler said.

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