NEW YORK (Reuters) - Short-sellers placed more bets that shares of social media company Snap Inc would continue to fall on Tuesday, representing about 2.4 percent of trading volume in the stock, even though Snap is one of the most expensive shares on Wall Street to borrow.

FILE PHOTO - A woman wears Snapchat Spectacles on the floor of the New York Stock Exchange (NYSE) while waiting for Snap Inc. to list their IPO in New York, U.S., March 2, 2017. REUTERS/Brendan McDermid

Around 600,000 shares were shorted in morning trading, according to Ihor Dusaniwsky at S3 Partners, a financial analytics firm.

“Snap is one of the most expensive stocks to borrow on the Street right now,” said Dusaniwsky. “For a stock that’s that expensive, its quite a lot of demand.”

Short sellers borrow and then sell stocks they think will fall in value, hoping to profit by buying the stock back more cheaply later on and returning it to its owner.

There was an initial rush to short the stock after its March initial public offering.

On Tuesday, Snap shares hit their lowest point since trading began after lead underwriter Morgan Stanley downgraded the stock and raised concerns about the company’s ability to compete against rival Instagram.

In total, Snap short interest is now $1.19 billion, down $245 million, or 17 percent, from its historical high of $1.44 billion that it hit on June 1.

Investors are paying a 50 percent to 60 percent fee on their total notional short position, or the total borrowed, on an annualized basis to short the stock, with Tuesday’s spot borrow rates - meaning the price for anyone shorting it today - going at a 70 percent to 80 percent fee, Dusaniwsky said.

That compares with an annual fee of under 0.5 percent for an easy-to-short stock. Snap is the second most expensive stock to borrow in the U.S. after Sears Holding Corp, Dusaniwsky said.

The fee is so high because high retail demand for the shares means there is a small amount of stock available to short, he said.

Snap’s shares will have to drop considerably for short-sellers placing bets now to make money, after accounting for the borrowing fees.

“If I shorted Snap today it has to drop by $1 by end of month to break even,” said Dusaniwsky.

The high volume of trading in Snap shares on Tuesday was being driven more by long holders, who look for the value of a stock to rise, said Dusaniwsky.

“It’s not the shorts that are driving the price of Snap down, it’s the longs selling their position,” he said.