“It’s Moving Like GameStop”… U.S. Public Pension Fund Cuts Tesla Over Musk Risk

According to Institutional Investor, pressure from pension funds on Tesla has intensified since Elon Musk effectively took control of the so‑called Department of Government Efficiency. Overseas pension funds such as Denmark’s $20 billion AkademikerPension exited their Tesla stakes early, citing Musk’s political behavior. U.S. institutions, by contrast, have so far watched from the sidelines without taking a clear stance, arguing that divestment would be merely symbolic and have little strategic impact.

But now that Tesla is facing a double whammy of mounting global criticism and worsening financial results, a $500 million county pension fund in Pennsylvania has become the first U.S. plan to publicly announce a halt to new investments in the company. One board member involved in the decision even described Tesla as “looking like a meme stock right now.”

In May, the Lehigh County Pension Board decided to suspend all new investments, stating that “Musk’s increasingly politicized image is damaging Tesla’s reputation and performance.” The fund is also exploring the possibility of selling the Tesla shares held in its passive funds. Doing so, however, would require creating customized indices, making the process far more complex.

Mark Pinsley, the Lehigh County controller who led the move, said in an official statement that “Tesla is losing trust right now,” adding that “Musk has put himself at the center of the show and is destabilizing one of the most recognizable brands in America.”

Tesla’s troubles became visible as Musk stepped fully onto the political stage. Protests and criticism from politicians, pension plan participants, and civil society groups around the world have mounted, with growing calls to halt new investments or unwind existing stakes. In April, Tesla’s annual net income plunged 71%, and automotive revenue fell 20% year over year.

Even so, the stock has rebounded. After Musk said he would step back from his “Dogecoin (DOGE)” antics and refocus on the car business, investor sentiment improved. As of May 20, the stock was still down 9% year‑to‑date, but it had climbed 55% from its March 10 low of $222.

Pinsley, however, says that “the recent rebound only deepens our suspicions.” “Something feels off. It reminds me of GameStop. Why is the stock even going up?” According to him, the pension fund’s decision is based not on short‑term returns but on long‑term risk management. “We’re not here to day‑trade. We want to invest in companies that will remain sustainable over time.”

Many institutions still believe that selling Tesla shares would have little real‑world impact and would be procedurally cumbersome. Instead, they argue that investors should use their position as shareholders to push for change from within. In fact, Kopernik CIO Dave Iben said at Value Invest New York in March that “if I sell, it just means someone who doesn’t care will buy those shares.”

Some state treasurers have launched shareholder campaigns demanding new leadership on Tesla’s board, but they have yet to see results. The WSJ reported that Tesla was reviewing a CEO succession plan, but Tesla’s chair, Robyn Denholm, denied the report.

Pinsley counters that “if activism were working, Musk’s behavior would already have changed,” bluntly adding that “it may sound like a good theory, but in practice it doesn’t work at all.”

While other U.S. pension funds have yet to state their positions publicly, he believes awareness of “Musk risk” is spreading. “When you talk to institutional investors, there’s broad agreement that Tesla’s current market cap is wildly out of line with its fundamentals.”

According to a report from Yahoo Finance, Chinese EV maker BYD surpassed Tesla in April registrations in Europe for the first time.

Research firm JATO Dynamics reported that while Tesla’s EV sales fell 49%, BYD’s EV sales jumped 169%. Despite the news, Tesla’s share price rose nearly 2% on Thursday.

The company’s global analyst Felipe Munoz wrote in the report, “The gap in monthly sales between the two brands may not be huge, but the implications are significant. This is a watershed moment for the European car market.” “That’s especially true given that Tesla has led the European BEV market for years, whereas BYD only began its full‑scale expansion into Europe—outside of Norway and the Netherlands—at the end of 2022.”

Tesla’s recent struggles in Europe are no longer an industry secret. Registration data released earlier showed sharp declines in Tesla registrations across most major markets, including France (‑59%), Denmark (‑67%), Sweden (‑81%), the U.K. (‑62%), and Germany (‑46%).