Reddit mascot rings the opening bell, at the New York Stock Exchange (NYSE) in New York City, U.S., March 21, 2024.
Brendan McDermid | Reuters
Reddit shares rose 11% in extended trading on Thursday on the social media company’s inclusion in the S&P 500.
The tech company, known for a variety of topical message boards, will join the S&P 500 on Aug 18, replacing AvalonBay Communities Inc., according to a S&P Dow Jones Indices announcement.
Companies often see their stocks climb when they’re added to major indexes because fund managers who trace the benchmarks have to buy shares to match the changes.
Reddit becomes only the second pureplay social media company in the benchmark index. Meta, one of the world’s most valuable companies is the other.
Pinterest and Snap both went public much long before Reddit, but they’re smaller by market cap. Twitter was in the S&P 500 until it was acquired by Elon Musk in 2022. It’s now called X and is owned by SpaceX.
Reddit reported second-quarter earnings in late July and revealed its eight-straight quarter of sales growth topping 60%. But its shares tanked when it revealed in an investor letter that its “search referrals were choppy,” which spooked investors concerned about Reddit’s reliance on Google to obtain new users.
Steve Huffman, the CEO of Reddit, attributed the search volatility to Google increasingly pushing its Gemini-powered AI Overviews, which has dinged the company’s web traffic along with a number of publishers and online sites.
“If we look at the Google ecosystem, the 10 blue links have driven a tremendous amount of value for the whole ecosystem,” Huffman said. “AI Overviews has yet to make a similar level of positive impact, and that seems consistent across the broader landscape.”
Sun Communities Inc. will also join the S&P MidCap 400 on Aug. 20, replacing Webster Financial Corp., the announcement said.
WATCH: Reddit CEO Steve Huffman on Q2 results: Investors are right to look at U.S. user growth.
