Reddit will join the S&P 500 on Aug. 18, replacing AvalonBay Communities after Equity Residential's acquisition of the real estate firm. Shares jumped in after-hours trading, but analysts still flag risks to Reddit's advertising business as artificial intelligence reshapes how people search for information online.
Reddit Replaces AvalonBay in Index Shakeup
S&P Dow Jones Indices said Reddit will replace AvalonBay Communities in the S&P 500 on Tuesday, Aug. 18, before the start of trading. The index provider noted that Equity Residential, already part of the index, is acquiring AvalonBay, with the deal expected to close soon. After the merger, the combined company will change its name to Vivmark Residential and stay on the S&P 500.
Shares Jump After Hours
MarketWatch reported Reddit shares jumped as high as 11% in after-hours trading Thursday. Investinglive put the after-hours gain at over 8.5% in the same session. Even so, Reddit's stock is down 31.2% so far this year as of Thursday's close, trading around $175, off highs of more than $270 reached last year. The company, which went public in 2024, has a market cap of around $29.5 billion.
Long Road to Inclusion
Speculation that Reddit could join the S&P 500 has circulated since at least last year. But last month, Ferguson Enterprises secured the spot instead, replacing videogame developer Electronic Arts, which went private this month.
Analysts Weigh AI Risk to Ad Business
When Reddit reported quarterly results last month, sales and earnings per share topped Wall Street's estimates, helped by its advertising segment. However, executives pointed to "volatile" traffic and "choppy" search referrals. According to Barron's, concerns have surfaced over the company's ability to drive traffic as artificial intelligence becomes a bigger source of online information.
Wedbush analysts, in a note last month, said Reddit had faced traffic problems before but argued the company could make AI more intelligent. According to MarketWatch: "delivers meaningful value to model training and search overall".
Sources: MarketWatch, Investinglive
Trading involves risk.
Risk Disclaimer
