Key facts
- Reddit shares surged over 12% in premarket trading following the announcement of its inclusion in the S&P 500 index.
- The social media platform will replace AvalonBay Communities in the benchmark index.
- J.P.Morgan analysts estimate that S&P 500 index funds may need to purchase 16.7 million Reddit shares.
- AvalonBay Communities is being removed from the S&P 500 due to its agreement to merge with Equity Residential.
- The combined entity, Vivmark Residential, is expected to remain in the S&P 500 after the merger.
Reddit shares surged more than 12% in premarket trading on Friday after S&P Dow Jones Indices announced the social media platform would be added to the benchmark S&P 500 index, replacing AvalonBay Communities.
Analysts at J.P.Morgan estimate that index funds tracking the S&P 500 could be required to purchase approximately 16.7 million Reddit shares. This volume is nearly three times the stock's average daily trading volume of about 5.98 million shares since its initial public offering in March 2024, according to LSEG data.
Reddit shares were last up 12.6% at $177.97, with over $28.9 million worth of shares changing hands by 5:24 a.m. ET. The stock has experienced a decline of more than 31% this year through Thursday's close and is down over 42% from its all-time high reached in September 2025.
In its most recent earnings report, Reddit noted that fluctuating search-engine traffic impacted U.S. user growth in the second quarter, despite an optimistic revenue forecast.
AvalonBay is being removed from the index after agreeing in May to an all-stock merger with Equity Residential. The proposed merger aims to create a rental housing company with an enterprise value of $69 billion, and the deal is expected to close in the second half of 2026. The combined company will operate under the name Vivmark Residential and will remain in the S&P 500 following the completion of the merger, S&P Dow Jones Indices confirmed.
Stephens analyst Melissa Roberts commented that companies newly added to the S&P 500 have historically outperformed the benchmark from the announcement date to the inclusion date, with the most significant gains often occurring the day after the announcement. However, she noted that these stocks typically give back some gains and lag the benchmark by approximately 2% over the subsequent three months.