Reddit shares rose 11% in extended trading Thursday after the company was announced as a new member of the S&P 500. The company will join the index on August 18, replacing AvalonBay Communities, according to a release from S&P Dow Jones Indices.
The jump is typical for companies added to major indexes. Fund managers who track benchmarks have to buy shares to match the changes, which pushes prices higher. Reddit had been the subject of speculation about S&P 500 inclusion for months, according to MarketWatch.
Reddit's addition makes it only the second pureplay social media company in the S&P 500. Meta is the other. Pinterest and Snap both went public long before Reddit but remain smaller by market cap. Twitter was in the S&P 500 until Elon Musk acquired it in 2022. It is now called X and is owned by SpaceX.
The news comes after a difficult stretch for Reddit's stock. The company reported second-quarter earnings in late July and revealed its eighth straight quarter of sales growth topping 60%. But the stock fell after the company told investors that its search referrals were choppy, raising concern about Reddit's dependence on Google to bring in new users.
Reddit CEO Steve Huffman attributed the search volatility to Google increasingly pushing its Gemini-powered AI Overviews, pulling attention away from traditional search results that have historically driven traffic to Reddit forums.
The company hosts online forums on thousands of topics and went public in 2024. Its run of strong revenue growth has made it a candidate for index inclusion, though concerns about its reliance on a single traffic source have kept some analysts cautious.
As part of the same round of index changes announced Thursday, Sun Communities will join the S&P MidCap 400, replacing Webster Financial.
