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

Reddit's stock experienced a significant boost, jumping more than 11% on Friday following the announcement that it will be added to the benchmark S&P 500 index. The social media platform is set to replace AvalonBay Communities, with the changes taking effect before the market opens on August 18.

Analysts at J.P. Morgan project that index funds mirroring the S&P 500 will need to acquire around 16.7 million Reddit shares. This demand is substantial, nearly tripling the stock's average daily trading volume of approximately 5.98 million shares since its public debut in March 2024. By 09:32 a.m. ET, Reddit shares were trading at $175.69, with over $201 million worth of stock changing hands.

Despite this recent positive movement, Reddit's stock has faced challenges, declining more than 31% year-to-date and over 42% from its peak in September 2025. The company's second-quarter earnings report indicated that choppy search-engine traffic negatively impacted U.S. user growth, overshadowing an otherwise optimistic revenue forecast.

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index funds tracking the S&P 500 would need to buy 16.7 million Reddit shares.

AvalonBay Communities is being removed from the index subsequent to its agreement in May to a stock merger with Equity Residential. This merger is expected to create a rental housing company valued at $69 billion and is slated for completion in the latter half of 2026. The combined entity, to be named Vivmark Residential, is anticipated to remain within the S&P 500 following the merger.

Historically, new additions to the S&P 500 have shown strong performance from the announcement to the inclusion date, with the most significant gains often occurring the day after the announcement. However, analysts caution that these stocks tend to give back some of those gains and may lag the benchmark by about 2% in the three months following their inclusion.

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new S&P 500 additions have historically outperformed the benchmark from announcement to inclusion, with the biggest gains coming the day after the announcement. After inclusion, however, they have typically given back some gains and lagged the benchmark over the next three months by about 2 per cent.