SAN FRANCISCO (Reuters) - Shares of Snap Inc SNAP.N slumped to new lows on Wednesday while short sellers closed out their bets following paper profits of half a billion dollars since the Snapchat owner's market debut in March.

FILE PHOTO: The logo of messaging app Snapchat is seen at a booth at TechFair LA, a technology job fair, in Los Angeles, California, U.S., January 26, 2017. REUTERS/Lucy Nicholson/File Photo

Sky-high costs to borrow Snap shares are leading many short sellers to avoid betting on further price declines until more shares become available.

That could happen soon, since early investors on Monday were allowed to sell shares for the first time since Snap’s $3.4 billion initial public offer.

The stock tumbled 3.6 percent on the day, bringing its loss this week to almost 9 percent.

Snap’s trading volume spiked as the lockup expired, but the shares sold have yet to make their way to brokers who lend the stock.

Short sellers on Wednesday mostly paid annualized interest rates of around 65 percent to borrow Snap shares, although 500,000 shares were newly loaned out at a 90 percent interest rate, according to S3 Partners, a financial analytics firm.

Early investors including Lightspeed Venture Partners were permitted to sell up to 400 million shares as of Monday, with employees owning another 782 million allowed to start selling on Aug. 14, four days after Snap reports quarterly results, according to JPMorgan analyst Doug Anmuth.

Short sellers have trimmed their total bets to about $900 million from $1.5 billion at the start of June, with total paper profits for short sellers since the IPO now at $492 million, said Ihor Dusaniwsky, S3 Partners’ head of research.

The reduced value of outstanding short bets was a result of the falling stock price as well as traders closing their bets.

“Once the stock becomes available and the rates come down, there should be more pressure because it will be cheaper to short,” Dusaniwsky said.

Punished by investor concerns about user growth and waning confidence in its ability to eventually turn a profit, Snap has sunk 25 percent below its $17 IPO price and is down over 50 percent from a record high reached shortly after its market debut, the third-largest for a U.S. technology company.

In an additional blow, new rules unveiled in recent days mean Snap will be excluded from the S&P 500 .SPX and FTSE Russell indexes due to its dual share structure that denies voting rights to investors.

Nearly 49,000 Snap shares were traded on Monday, more than double the average daily volume during the previous week and the most since mid-May.

The stock on Wednesday was down 48 cents at $12.62.