Reddit shares jumped more than 8.5% in after-hours trading on Thursday after S&P Dow Jones Indices announced that the social media platform will join the S&P 500.

The index change will take effect before markets open on August 18, marking Reddit's first entry into the benchmark since it went public. Reddit will replace AvalonBay Communities, which is being acquired by Equity Residential.

Reddit operates the social discussion platform of the same name and trades on the New York Stock Exchange under the ticker RDDT, having completed its initial public offering there in March 2024. AvalonBay Communities is a residential real estate company, and Equity Residential is a real estate investment trust focused on apartment properties.

The S&P 500 is a capitalization-weighted benchmark of large-cap U.S. companies maintained by S&P Dow Jones Indices, which announces additions and deletions to the index as constituent companies change through mergers, acquisitions, and other corporate actions. Companies must meet published eligibility criteria to be added, including minimum market capitalization, sufficient liquidity and public float, and positive earnings on a GAAP basis.

Inclusion carries practical consequences beyond the benchmark itself: because passive funds that track the S&P 500 hold every constituent, they must purchase shares of a newly added company as part of the rebalancing, which is why index changes are closely watched events in U.S. markets. The adjustment tied to this change will be completed before trading begins on August 18, when Reddit's addition and AvalonBay's removal take effect simultaneously.

Source: Investinglive