Reddit shares surge on S&P 500 inclusion later in August

Reddit's stock soared more than 10 percent after trading hours on Thursday, August 13, as the social media platform joins the S&P 500 index, according to S&P Dow Jones Indices. This off-cycle change is set to take effect on August 18, when trading begins. The addition of Reddit replaces AvalonBay Communities, which is being acquired by Equity Residential.

Based in San Francisco, Reddit went public in March 2024. The company has been focusing on advertising technology to expand its presence in the digital ads market dominated by Meta Platforms and Google. Since its IPO, Reddit has experienced steady revenue growth, with a 60 percent increase in sales reported in July. Despite this impressive performance, investors have been eagerly anticipating new revenue opportunities, particularly in the context of the ongoing artificial intelligence boom.

While Reddit has secured lucrative deals with OpenAI and Google, investors had hoped for more partnerships. As of Thursday's close, Reddit's shares were down 31 percent year-to-date. The inclusion of companies in the S&P 500 has become increasingly important due to the rise of passive investing. To qualify for the gauge, a company must have a market capitalization of at least $22.7 billion and meet certain profitability, liquidity, and share float requirements, as per July guidelines. In June, Marvell Technology and Flex joined the S&P 500, replacing Pool and Campbell Soup.