Tesla stock plunges 14% as Trump and Elon Musk break up. Here’s what the numbers show

Tesla stock is having a rough week. Shares have fallen more than 20% in the last five days, and were down 14% on Thursday alone.

Meanwhile, trading volumes — the number of shares trading hands — paint a distinct picture. Look beyond the headline stock moves, and the type of selling starts to come into focus.

On days when Wall Street panics, trading volume typically surges. Last Thursday, May 30, when The New York Times (NYT) published a bombshell story about Elon Musk’s drug use, erratic behavior, and political entanglements, Tesla’s volume spiked to more than 123 million shares. In the days following, as Musk broke rank to come out against the new tax bill, the stock kept on falling, but volume largely declined — to about 81 million shares on Monday, under 100 million on Tuesday and Wednesday, and about 80 million as of midday Thursday.

That pattern suggested the later move down may have been driven more by retail investors, with smaller players getting spooked or perhaps disliking Musk’s political shift, rather than big institutions rushing to exit. When both volumes and prices see declines, it’s often a sign of “mom and pop” selling.

But by the close of market on Thursday? The picture changed again, dramatically. Volume spiked, zooming past the post-NYT surge to a stunning 275 million shares, as Tesla stock sank to $284. And that kind of move, with price falling sharply and volume rising tremendously — to levels not seen for months, if not years — starts to look a lot like big-money participation. If institutional investors were on the sidelines earlier this week, they may not be anymore.

The longer history of retail love and institutional wariness

Tesla has long been a favorite among retail investors, a dynamic that gained momentum in 2020, when pandemic-era trading booms and Elon Musk’s cult-like appeal helped make it one of the most widely held and discussed stocks on the internet. Platforms like Robinhood (HOOD) and Reddit’s WallStreetBets treated Tesla less like a company and more like a movement.

At the same time, Tesla’s addition to the S&P 500 in December of 2020 forced a wave of institutional buying, including large buys from passive index funds. Later, even as Tesla’s valuation soared, traditional asset managers remained somewhat skeptical, seemingly turned off by Musk’s volatility, the stock’s eye-watering multiples, governance concerns, and its meme-driven nature.

By early 2021, institutional ownership hovered around 40% to 45%, considered somewhat below the norm for a company of Tesla’s size. Other “Magnificent 7" stocks, namely Microsoft, Nvidia, Apple, and Google parent company Alphabet, have institutional ownership as high as 60% to 70%+.

And that pattern has largely held in the years since. While institutional holdings have ticked up, and now sit just under 49%, Tesla remains somewhat under-owned by the biggest money managers compared to more staid tech names. The stock also continues to attract tremendous interest and attention from individual investors, dominating coverage across YouTube (GOOGL) finance channels, Reddit threads, and TikTok explainers.

The result is a stock that can be unusually sentiment-driven for a company of its size. It comes down to Tesla’s liquidity and prominence (some might say notoriety). Structurally speaking, it’s just a little more vulnerable to headlines than some of its big-tech peers.

Now there’s reason to think the big players are growing wary all over again

According to the most recent 13F filings, some larger firms have trimmed their Tesla stakes, while others have added. They’re months out of date, however. The danger now? If Musk’s erratic behavior keeps making headlines, big firms may decide Tesla stock is not worth what looks to be the current level of risk. And if they leave in force, this week’s drop could be only the beginning.