Some investors were stepping in to buy Snap shares amid their big plunge Thursday, but traders and analysts cautioned that this could be a troubled stock through the whole summer simply because of the laws of supply and demand.
Many insiders are restricted from selling stock for an agreed upon lockup period after the initial public offering, but that changes later this year when a ton more shares will likely come onto the market.
"We expect attention to turn to SNAP's July-August lock-up expirations. Snap has 150- & 180-day lock-up expirations beginning July 31," JPMorgan's Doug Anmuth wrote in a note to clients Thursday. He reiterated his neutral rating on Snap in the report.
The analyst cited how an additional 84 percent of the company's shares outstanding will become available for sale from the end of July through August.
Other research analysts also pointed to the lockup expiration as a negative factor for the company's share price. Nearly 70 percent of Wall Street does not have buy ratings on Snap shares, according to FactSet. Such a mixed view on a large technology IPO is a rarity.
"The problem with such a print right out of the gate is that there is little near-term valuation support given the lack of profitability and massive lock up expiration around the corner," Barclays' Ross Sandler wrote in a note to clients Thursday, where he reiterated his equal weight rating on the company.
Snap had fallen more than 23 percent at one point Thursday, but traded off the lows. Most recently, the stock was down about 19 percent.
The large amount in the supply of new Snap shares is a big concern for investors.
"Stock prices, especially in the short term, are all about supply and demand, so any issuance of additional supply has an effect," LPS Financial's chief investment officer, Aron Pinson, wrote in an email. "In the case of SNAP specifically, the magnitude of supply hitting the market vs. the amount currently available is enormous and is sure to weigh on its shares."
Another investor said insiders may still sell at even lower share prices.
"Lock ups when they expire can easily act as a ceiling for the shares even if the news improves from here. It's important to remember these are motivated sellers with little price sensitivity," Belpointe's chief strategist, David Nelson, wrote in an email. "Their cost basis is significantly lower and any proceeds is almost pure profit."
One trader is staying bearish on Snap primarily on his negative view of its fundamentals, not just the lockup dynamics.
Brad Lamensdorf, portfolio manager of the short-selling Ranger Equity Bear ETF, cited the low barriers to entry to Snap's business, the company's net losses and its large capital expenditures.
"We aren't covering a share," Lamensdorf wrote in an email. "It is still at like 35 times sales which is silly. It will never grow into that price to sales ratio. A lower price is needed."
Disclosure: Brad Lamensdorf's HDGE ETF is short Snap shares. David Nelson and Aron Pinson do not have positions in Snap.
Disclosure: NBCUniversal, the parent company of CNBC, is an investor in Snap.