Snap shares tumble as short sellers move in

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Snap Inc's shares tumbled 11 percent on Tuesday and traders raced to position themselves to cash in on further losses after analysts gave the company a lukewarm reception following its red-hot market debut. Snap's $3.4 billion public listing on Thursday was the hottest technology offering in three years, but its lofty valuation and slowing user growth have raised eyebrows on Wall Street and are now attracting traders who expect its shares to fall. Traders paid annualized interest rates as high as 40 percent to be among the first to short-sell the stock, according to S3 Partners, a financial analytics firm. The owner of messaging app Snapchat is not profitable and has warned it may never be. Much of last week's frenetic trading in Snap has yet to settle, making it difficult for brokers to estimate how many shares are available to lend to short sellers, said S3 Partners Managing Director of Research Ihor Dusaniwsky.

As a result, brokers are facing a "chaotic" lending environment and charging short sellers annualized rates between 20 percent and 40 percent to borrow Snap's shares, with early short interest approaching $100 million, he said. In its market debut on Thursday, Snap surged 44 percent from its $17 IPO price to close at $24.48. Since then it has fallen 22 percent.

At mid-day on Tuesday Snap was down 10.8 percent at $21.20. Snap has been heavily traded since its market debut, rolling over the number of shares sold in the IPO more than twice. So far, no analysts have initiated the stock with a "buy" rating.

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