Reddit surges on S&P 500 inclusion, set to replace AvalonBay

Reddit's stock experienced a surge of over 11% on August 14, following news that the S&P Dow Jones Indices would include the social media platform in the S&P 500 index. This move would replace AvalonBay Communities in the benchmark index. Analysts at J.P. Morgan projected that index funds tracking the S&P 500 would need to purchase 16.7 million Reddit shares, which is nearly three times the company's average daily trading volume since its initial public offering in March 2024, according to LSEG data.

As of 09:32 a.m. ET, Reddit shares were trading at $175.69, with trading volume exceeding $201 million. The stock has faced a significant decline of more than 31% this year, and is down over 42% from its all-time high reached in September 2025. Reddit's recent earnings report indicated that sluggish search-engine traffic negatively impacted U.S. user growth in the second quarter, despite an optimistic revenue forecast.

The changes to the S&P 500 index are set to take effect before the market opens on August 18. AvalonBay Communities is being removed from the index after it agreed to an all-stock merger with Equity Residential in May, forming a rental housing company valued at $69 billion. The merger is anticipated to be completed in the second half of 2026, with the newly created company, Vivmark Residential, set to remain in the S&P 500 after the merger's completion.

Stephens analyst Melissa Roberts noted that new additions to the S&P 500 typically outperform the benchmark from the announcement until the day of inclusion, with the most substantial gains occurring the day after the announcement. However, these gains usually dissipate, and the companies generally lag behind the benchmark over the subsequent three months by approximately 2%.