Lehigh County Employees' Retirement Fund, Allentown, Pa., has directed its active external managers to pause any further purchases in Tesla stock until its board’s next meeting.
The $631 million pension fund’s board voted 4-2 in favor of the resolution at its May 6 meeting, said Mark Pinsley, county controller.
In a board resolution obtained by Pensions & Investments, the retirement plan's board directs that managers of actively managed funds in which it currently invests “shall not make any new purchases of Tesla from now until the next board meeting.”
The board also directs its investment consultant Cornerstone Advisors Asset Management “deliver, no later than 2 weeks before the next board meeting, an analysis of the fund's current exposure to Tesla and an assessment of the financial, governance, and reputational risks the board should be aware of with Tesla and other stocks,” according to the resolution.
The resolution cites Tesla’s 71% year-over-year decline in net income to $409 million in its first-quarter earnings report, a 9% decrease in total revenue during the period to $19.3% and a 20% drop in automotive revenue year-over-year to $13.9 billion.
The resolution also cited the contraction of Tesla’s operating margin to 2.1%, down from 5.5% in the first quarter of 2024, “indicating reduced profitability,” and a price-to-earnings ratio of about 154.13, which the resolution says is “significantly higher than the automotive industry average of 8 to 12, suggesting potential overvaluation.”
“These financial indicators have prompted the Lehigh County Pension Board to reassess its investment strategy to ensure alignment with industry standards and fiduciary responsibilities,” the resolution said.
PInsley said this is not a divestment decision. The retirement fund is not selling existing holdings, and the vote only applies to new purchases in actively managed accounts, Pinsley said. That meeting will be in about 90 days, he said.
“TeslaTakeDown has exposed how much damage Elon Musk has done to the Tesla brand. As fiduciaries, we have to pay attention, because when a brand weakens and the fundamentals have already started to slide, value follows. Our responsibility is to protect the fund, not ride out a preventable decline," Pinsley said.
As of Dec. 31, the pension fund’s actual allocation to domestic equities was 44.8%.
Mark Pinsley, county controller, could not be immediately reached for further information.
