What it means
The first sense comes from the verb to tank, which means to fail or drop quickly. When traders say a stock is tanking, they mean the price is dropping fast, often after bad news such as poor earnings or a lost contract.
A market in the tank is one where many prices are falling together. Prices can sink for good reasons or bad ones.
A company may have disappointed investors with weak profit, or the whole market may have been hit by fear and forced selling. Telling these cases apart matters because a temporary panic can create buying chances, while a collapse caused by a failing business may not recover.
The second sense borrows from motoring. Having something in the tank means a person or business still has reserves of energy, cash or capacity to keep going.
A finance director might say the company still has plenty in the tank, meaning it has cash and unused credit to survive a slow year. Because the phrase is slang, it should be avoided in formal documents.
Reports to a board, lenders or regulators need measured language and figures, such as a decline of 40% over three months. Colourful phrases are fine in conversation, provided everyone understands which meaning is intended.
The practical lesson for a non-specialist is to ask what lies behind the words. If someone says a share is in the tank, find out how far it has fallen, over what period and why.
If they say there is plenty in the tank, ask for the cash balance and the size of the unused loan facilities. It is also worth remembering that markets often overshoot in both directions.
A share that has fallen sharply may keep falling for a while before it settles, which is why many investors build positions gradually rather than buying all at once.
In practice
Real-world examples.
Example
A software company reports that its largest customer will not renew. Its share price drops from $50 to $30 in a single day, and the financial press says the stock is in the tank. Analysts cut their forecasts for the following year. Several funds sell their holdings before the next earnings date.
Example
A retailer's finance chief tells the board that, despite a weak summer, the business still has plenty in the tank. She points to $4,000,000 in cash and an undrawn credit line of $3,000,000. The board decides not to cut its hiring plans. It agrees to review the position again at the end of the quarter.
Example
A trader notices that an entire sector, such as airlines, is in the tank after a spike in fuel prices. She studies which companies are best placed to survive and considers buying the strongest one at a lower price. She sets a limit on how much she is willing to risk.
Formula
Calculation
Percentage decline = (Old price - New price) / Old price x 100
Suppose a share was priced at $40 and has fallen to $24. The fall is 40 - 24 = $16.
The percentage decline is 16 / 40 x 100 = 40%. To get back to $40, the share would need to rise by 16 / 24 x 100 = 66.7%, which shows why large falls are so hard to recover from.Case study
Seen in the real world.
Northgate Devices is a fictional manufacturer whose shares traded at $20 for two years. After a product recall, the price fell to $11 within a week, and commentators said the shares were in the tank.
The finance team calculated that the recall would cost about $15,000,000, while the company held $60,000,000 in cash and had no short-term debt. At 30,000,000 shares, the cost worked out to $0.50 per share, much smaller than the $9 fall in the price.
In this illustrative case, the board concluded that the market was overreacting, and it began a modest share buyback while explaining the numbers to investors. The shares gradually recovered as the facts became clear, though the board noted that the outcome was not guaranteed. It also published a clear note on the recall cost so that investors could do the same sums.
Watch out
Common mistakes.
- Assuming a stock in the tank is automatically a bargain, when the fall may reflect real problems.
- Using the slang in formal reports instead of stating the percentage decline and the period.
- Forgetting that a 40% fall needs a rise of more than 40% to recover.
Questions
People also ask.
What does it mean when a stock is tanking?
It means the price is falling quickly, usually because of bad news or heavy selling.
What does having something left in the tank mean?
It means a person or business still has reserves, such as cash or capacity, to carry on.
How can I tell whether a fall is justified?
Compare the price drop with the size of the underlying problem, such as lost profit or extra costs per share.
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