A huge number of previously untouched Snap shares can now be dumped onto the market (SNAP)

Snap's day of reckoning is here, and it could be a rough couple days.

The first phase of the company's post-initial public offering lock-up expired over the weekend, making 400 million shares owned by early investors eligible for open-market trading. The stock was already down more than 2% in pre-market trading on Monday.

The influx of new tradable shares could spell further weakness for Snap, which had already lost 19% through Friday since pricing its IPO on March 1. The company has emerged as a favorite target for short sellers who don't view the company as worthy of the $20 billion valuation it initially received.

In fact, Snap was such a popular target for bearish bets that the cost of shorts skyrocketed, with borrowing fees of 50% to 60% making the trade prohibitively expensive to most investors. However, the new glut of shares available to be sold short will shrink that cost to about 5%, according to data compile by the financial analytics firm S3 Partners.

That means it could once again be open season on Snap's shares as the company attempts to combat competition from the likes of Facebook and Instagram.

And while there's roughly 800 million additional shares set to hit the market mid-to-late August, those will be units owned by employees, directors, founders and insiders — people who may be less inclined to sell right away.

In other words, if there's going to be an uptick in shorting activity, it's likely to come early this week, depending on how many shares early investors release into the wild.

But not everyone is quite so bearish on the prospect of more Snap shares hitting the market. In a mid-July client note, Barclays highlighted the post-lock-up period as an ideal time to buy, once shares bottom out.

"The negativity in the past few months around SNAP ahead of its lock up expiration is creating an opportunity in our view," Barclays wrote in a recent note to clients. "We would wait until the heavy lock up volume subsides to add to positions, likely sometime mid 3Q."

Meanwhile, Snap has long been preparing for the August 14 lock-up expiration for employee shares. In the run-up to its IPO, the company held multiple seminars for workers, covering the basics of what it means to be a public stockholder, like not revealing insider information or shorting stocks, according to people familiar with the matter. Professors from Stanford University were also enlisted to coach the company’s soon-to-be millionaires on how to manage their wealth.

Ahead of the upcoming second-round expiration, Snap CEO Evan Spiegel has stressed to employees that they shouldn't worry about the company's stock price — instead encouraging them to focus on creating innovative products.

The process is sure to test some patience along the way. And the ultimate question will continue to linger: should they cut and run now, or stick to their reclusive founder's vision?

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