Shares of social media platform Reddit surged in premarket trading on Friday after S&P Dow Jones Indices announced that the company will be added to the S&P 500 index, taking the slot being vacated by AvalonBay Communities. The stock rose more than 12% in early activity as market participants reacted to the pending inclusion.
J.P. Morgan analysts calculated that funds replicating the S&P 500 could be required to buy approximately 16.7 million Reddit shares to reflect the change in the benchmark. That projected demand is nearly three times Reddit's average daily trading volume of about 5.98 million shares since its March 2024 initial public offering, according to LSEG data cited by market sources.
By 5:24 a.m. ET, Reddit shares were last trading up 12.6% at $177.97, with more than $28.9 million worth of stock reported changing hands. The company's share price, however, has faced pressure this year - it was down more than 31% year-to-date through Thursday's market close and sits over 42% below its all-time high reached in September 2025.
In its most recent earnings report, Reddit noted that uneven search-engine traffic weighed on U.S. user growth during the second quarter, an issue the company said overshadowed an otherwise upbeat revenue forecast. That operational headwind contrasts with the positive momentum from index inclusion, creating a mixed near-term picture for the stock.
AvalonBay Communities will be removed from the S&P 500 after the company agreed in May to an all-stock merger with Equity Residential. The two firms said the transaction will create a combined rental housing company with an enterprise value of $69 billion. The companies expect the deal to close in the second half of 2026.
S&P Dow Jones Indices said the merged firm - which will operate under the name Vivmark Residential - will remain in the S&P 500 after the merger is finalized.
Market commentators pointed to historical patterns around index additions. Stephens analyst Melissa Roberts observed that stocks announced for inclusion in the S&P 500 typically outperform the index in the span between their announcement and official inclusion, with the largest uplift tending to occur on the day after the announcement. Roberts also noted that following inclusion, those same stocks have commonly relinquished some of the gains and on average underperformed the S&P 500 by about 2% over the subsequent three-month period.
The mechanics of index rebalancing imply that Reddit could see a concentrated period of buying as passive funds adjust their holdings to match the S&P 500 composition. Given the J.P. Morgan estimate and the stock's recent trading volumes, that adjustment could represent a material uplift to daily liquidity needs for the shares.
While the inclusion is a clear near-term catalyst for demand, the company's operational commentary on U.S. user growth in its earnings report highlights existing performance considerations that remain relevant to investors evaluating the longer-term case.