Investors in Snap Inc (SNAP), the instant messaging and photo app got a dose of reality Thursday when its share price sunk back to its IPO (initial public offering) price of $17 a share as the tech sector took another hiding. However, those on the other side of the ledger has a day to remember.

After Thursday's 4.9 percent sell-off, short sellers pocketed a mark-to-market one day gains of $42 million, according to S3 Partners. (See also: Snap Shares Getting Closer to Post-IPO Low)

After what investors would have called a 'good IPO,' Snap surged to a high of $29.44 on March 3, one day after it began trading on the New York Stock Exchange. Despite the initial performance, Snap has attracted a fair amount of short selling interest as skeptics weighed in on the 'how will it make money' debate. "SNAP short interest topped out at $1.44 billion on May 30th and has gradually declined in the past three weeks as some short sellers covered their shorts to lock in profits," Ihor Dusaniwsky of S3 Partners, a financial analytics firm said.

"Short interest is now $1.13 billion, down 22% from its historical high. Including today’s 4% price drop, short sellers are up $195 million since SNAP’s March IPO."

Dusaniwsky believes that short interest in Snap will increase if its share price remains around its IPO price as lockups for insiders shares expire, which will release more shares into the market as some investors look to exit their position. This will bring the average borrowing cost down, attracting more short selling interest. "Short sellers have been paying expensive borrow rates since the middle of May and now they have a $195 million cushion to make the 46 day wait until the first lockup expiry more comfortable," Dusaniwsky said.

As the week comes to a close, shares in Snap are set to open up 1 percent. As at 9 a.m. EST, pre-market shares are trading at $17.20 a share. (See also: How Snapchat Makes Money)

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