Robinhood launches stock lending program in revenue diversification push

The Menlo Park, Calif.-based company earned $137.2 million from margin securities lending in 2021.

Robinhood Markets Inc on Wednesday said it launched a fully-paid securities lending program, which lets the online broker's users lend out shares they own through the popular app to market participants and passively collect a cut of the fees.

The move is part of Robinhood's efforts to diversify its income away from transactional revenue, which made up nearly three quarters of the company's revenue in the first quarter and were down 48% from a year earlier when individual investors were piling into so-called meme stocks.

Robinhood already makes money by lending out shares that its customers buy on margin, but the new fully-paid program will include all shares held by its nearly 23 million users, so long as they opt in and meet certain qualifications.

The new program will potentially bring in 1-to-2 times the revenue that Robinhood's margin securities lending program generates, the company's Chief Financial Officer, Jason Warnick, said on a call with analysts last week.

The Menlo Park, Calif.-based company earned $137.2 million from margin securities lending in 2021.

"Transactional revenue has been the core component of the revenue but as you build out the offering those other components become a more meaningful portion," Steve Quirk, Robinhood's chief brokerage officer, said in an interview.

Demand to borrow shares for a fee often comes from institutional investors and other brokerages looking to settle trades or facilitate short sales.

"It's just another way, particularly in a challenging market, like the one we've experienced lately, to generate a little bit of additional income off of an existing portfolio," said Quirk.

To qualify for the fully-paid lending program, Robinhood users must have $5,000 in total account value, at least $25,000 in reported income or some trading experience, he said.