Reddit (RDDT) is set to join the S&P 500 before the market opens on Aug. 18, replacing AvalonBay Communities (AVB). Morgan analysts estimate index funds that track the benchmark will need to buy about 16.7 million Reddit shares to reflect the adjustment. At Reddit's Friday-morning price of roughly $175.69, that's close to $2.9 billion worth of stock.
That is a lot of potential flow for a business that has had an average daily trading volume since its March 2024 IPO of approximately 5.98 million shares. This means that the projected demand for the index fund is about three times the typical daily volume of Reddit. Shares surged more than 11% on the announcement.
This scenario is a strange setup for investors. Reddit is down over 31% this year through Thursday and 42% from its all-time peak in September 2025. Now, after months of decline, a set of investors may suddenly have to buy the stock whether they love the fundamentals or not.
The next several trading sessions are less about opinion and more about mechanics. Trillions of dollars of passive and benchmark-aware assets follow the S&P 500. When a firm joins the index, funds that track it must rebalance their portfolios.
This behavior tends to lead to predicted buying pressure in advance of the effective inclusion date. The magnitude of this buying pressure is what's impressive for Reddit. Morgan's estimate of 16.7 million necessary shares translates to nearly three days of average trading volume in a somewhat tight rebalancing timeframe.
That helps explain why investors flocked to the shares right after the announcement. A conventional rally usually begins with a change in the business. An analyst upgrades a target.
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