- Robinhood unveiled its new stock lending feature, Stock Lending.
- The new offering enables investors to lend shares and receive passive income from borrowers.
- Stock Lending democratizes securities lending and provides Robinood with an additional revenue stream.
Stock brokerage app Robinhood announced the launch of Stock Lending today, a new feature that will allow users to lend out stocks in their portfolio to earn passive income from borrowers.
“Robinhood does the work of finding borrowers and managing transactions while customers can add a potential source of passive recurring income to their portfolio,” said Robinhood Chief Brokerage Officer Steve Quirk.
There are no minimum balance requirements in order to take advantage of Stock Lending, but users must have stocks paid in full. Fractional share stocks are not eligible. Once investors authorize Robinhood to lend the funds, Robinhood matches the user with a borrower. After their shares are lent out, users can track earnings, see their positions, and enable or disable Stock Lending at any time.
And while investors are still able to sell the shares they lent out at any point, there are a few potential downsides to Stock Lending. First, users’ loaned securities may not be protected under the Securities Investor Protection Act. Additionally, investors will receive cash payments instead of dividends on securities they loan out, which will likely have tax implications. Also notably, users may lose the right to vote with respect to their loaned securities.
The move democratizes access to fully paid securities lending. It also positions Robinhood to benefit from an additional revenue stream, as the company will pocket a portion of the fees from each loan.
Robinhood is in the process rolling out Stock Lending to its customer base. The company expects the feature to be available to all users by the end of this month.