Since Tesla chief Elon Musk took over the so-called Department of Government Efficiency, pensions have faced mounting pressure to divest from the company. But while overseas plans like Denmark’s $20 billion AkademikerPension dumped their Tesla holdings months ago due to Musk’s political activities, U.S. allocators have remained noncommittal, with many viewing divestment as symbolic rather than strategic.
Now, amid increased global pushback and plummeting profits, a $500 million county plan in Pennsylvania has become the first U.S. fund to publicly halt new Tesla investments over Musk’s conduct. And despite the recent rally, one board member has likened Tesla to a meme stock.
In May, the Lehigh County Pension Board voted to suspend all new Tesla investments, citing concerns that Musk’s increasingly political persona is harming the company’s reputation and performance. The board is also looking into the feasibility of divesting Tesla holdings from the pension’s passively managed funds (which would be a more arduous process and require some kind of customized mandate or index).
County Controller Mark Pinsley — the pension board member who introduced the motion — wrote that “Tesla is bleeding trust” as Musk “has made himself a spectacle” and is “destabilizing one of America's most recognizable brands.”
Behaving Like GameStop
Tesla’s struggles have been mounting since Musk entered the political arena. In recent months, the company has faced global protests and mounting pressure from politicians, plan participants, and advocacy groups calling for either divestment or to pause new investments in actively managed funds. In April, the company reported a 71 percent drop in annual profits and a 20 percent decline in revenue from car sales.
Yet despite these figures, Tesla’s stock price surged after Musk suggested he would step back from DOGE and refocus on the car company. While Tesla’s stock is still down 9 percent year-to-date as of May 20, it has rebounded 55 percent from its recent March 10 nadir of $222 per share.
But for Pinsley, the recent rally doesn’t erase long-term concerns about Tesla’s stability under Musk’s leadership but rather deepens his skepticism.
“Something is just amiss,” Pinsley told Institutional Investor in a phone interview, comparing Tesla to meme stocks. “It reminds me of GameStop — you wonder if something like that is happening. Why is it going up?”
Pinsley emphasized that the board’s decision was driven by long-term risk rather than short-term market fluctuations. “Right now, you might look at it and say the stock’s up, but we’re long-term investors,” he said. “We’re not looking for short-term hits. We want stability over time.”
Divestment vs. Activism
Allocators with whom II spoke dismissed divestment as an complex process and empty gesture that will not lead to change. Most argue that it would be more effective to push for reforms as a shareholder. As Kopernik Global Investors’ Chief Investment Officer Dave Iben said at Value Invest New York in March: “If I sell, I'm going to sell to somebody who doesn't care.”
Some fiduciaries are indeed trying that approach, with state treasurers urging Tesla’s board to consider new leadership. However, while the Wall Street Journal reported that Tesla was quietly exploring a CEO succession plan, board chair Robyn Denholm has denied this.
Pinsley rejected the idea that shareholder activism was a viable alternative to divestment, countering that if engagement worked, Musk’s behavior would have been curtailed by now. "We’d be seeing a change already," he said. “It’s a great argument, but it doesn’t hold water.”
While other U.S. plans with Tesla holdings have yet to publicly take a position on divestment or halt new investments, Pinsley expects more U.S. plans to follow Lehigh County’s lead as activist groups and plan participants gain the attention of fiduciaries. "If you talk to institutional investors, they know the fundamentals don’t make sense for its current market cap," he said.
