Reddit shares jump 15% as social media platform set to join S&P 500

Shares of social networking platform Reddit gained 15% at the Wall Street opening bell, surging to around $181.70 apiece, after the company is set to join the S&P 500 next week upon meeting the benchmark's eligibility requirements.

The inclusion is part of an off-cycle change that will see Reddit replace AvalonBay Communities (AVB), which is being acquired by existing index member Equity Residential.

Since the development does not reflect any change in the company's fundamentals, stocks often gain following index inclusion, as fund managers tracking the benchmark are required to buy shares to align their portfolios with the index changes.

Reddit will be added to the benchmark index before the start of trading on 18 August, S&P Dow Jones Indices said on Thursday. The inclusion will make Reddit only the second pure-play social media company in the index, after Meta (META).

Earlier this year, Pinterest and Snap were also included in the index, but their market capitalisations were significantly lower than Reddit's, which currently stands at around $30 billion.

With the inclusion, Reddit will be recognised as one of the approximately 500 largest and most influential publicly traded companies in the US and become one of the fastest-growing companies in the S&P 500.

Reddit remains in spotlight after June quarter results

In addition to the index inclusion, Reddit shares have also remained in the spotlight following the company's strong June-quarter performance. The San Francisco-based firm posted its eighth consecutive quarter of sales growth, with revenue rising 61% year-on-year to $804.9 million.

Net income jumped 183% to $252.85 million, while daily active users increased 18% to 130.3 million and weekly active users climbed 24% to 514.6 million. Adjusted EBITDA more than doubled to $343 million.

For the current quarter, the company expects revenue of $860 million-$870 million and adjusted EBITDA of $385 million-$395 million.

San Francisco-based Reddit, which went public in March 2024, has been investing in advertising technology, hoping to grow its share of the digital ads business dominated by industry giants Meta Platforms Inc. and Alphabet Inc.’s Google.

Reddit describes itself as a community of communities built around shared interests and passions. The platform hosts conversations across a wide range of topics, with millions of users posting, voting, commenting, and searching for information every day, and brands use it to engage with their audiences.

Its platform has grown into a vast repository of more than 26 billion posts and comments, capturing user-generated conversations and experiences across a wide range of topics.

(With inputs from Bloomberg)

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