Shares of Reddit jumped more than 12% in premarket trading Friday, touching $177.97, after S&P Dow Jones Indices announced the social media company will join the S&P 500 effective before trading opens on Tuesday, August 18. Reddit will replace AvalonBay Communities, which is being absorbed by fellow index member Equity Residential in an all-stock merger.
Analysts at J.P. Morgan estimate that index funds tracking the S&P 500 could need to purchase roughly 16.7 million Reddit shares to bring their holdings in line with the benchmark's new composition, a figure nearly three times the stock's average daily trading volume of about 5.98 million shares since its March 2024 initial public offering. That mechanical buying pressure is one reason newly added stocks have historically outperformed the broader index between announcement and inclusion, according to Stephens analyst Melissa Roberts, who noted the largest gains typically come the day after the announcement.
Despite Friday's pop, Reddit shares remain down more than 31% for the year and more than 42% below their all-time high reached in September 2025. The stock's struggles this year have centered on choppy search-engine referral traffic, which the company said weighed on U.S. user growth even as international expansion and advertising monetization continued to improve.
Reddit's inclusion caps a rapid growth run for the company. In its most recent quarter, Reddit reported revenue of $805 million, up 61% year-over-year, marking its eighth consecutive quarter of revenue growth exceeding 60%. The company has increasingly leaned on data-licensing partnerships with artificial intelligence firms that train models on its archive of user discussions, a business line that has become a meaningful contributor alongside traditional digital advertising.
AvalonBay's exit from the index is a byproduct of its pending combination with Equity Residential, a deal shareholders of both companies approved this week with more than 99% support at their respective special meetings. Under the merger terms, each AvalonBay share converts into 2.793 shares of Equity Residential, and the transaction could close as soon as Monday, August 17. Once complete, the combined company will drop both legacy names and begin trading as Vivmark Residential under the ticker VMRK, retaining its spot in the S&P 500 as the surviving entity.
S&P Dow Jones Indices also announced a related change to the S&P MidCap 400, with Sun Communities set to replace Webster Financial, which is being acquired by Spain's Banco Santander, effective August 20.
Reddit's addition makes it only the second pure-play social media company in the S&P 500 alongside Meta Platforms, according to market data, underscoring how quickly the platform has grown by market capitalization since going public. Investors will be watching closely over the coming trading sessions for continued index-related buying flows as the effective date approaches.
The reconstitution also highlights the ongoing churn within the S&P 500 as merger activity in more capital-intensive sectors like real estate creates openings for faster-growing technology and internet businesses to gain entry into the closely tracked benchmark.