Market efficiency has a central role in two distinct areas of corporate litigation: Rule 10b-5 securities claims and shareholder appraisal proceedings. Although both types of litigation require courts to evaluate the efficiency of the market for a security, the degree of efficiency required in each is entirely different. Securities fraud litigation depends on informational efficiency, which asks whether new public information is rapidly incorporated into a security’s price. By contrast, appraisal litigation requires fundamental efficiency, which asks whether market prices accurately reflect a company’s intrinsic value, therefore providing a reliable measure of fair value for the shareholder plaintiff. This Comment argues that courts often acknowledge the distinction between informational and fundamental efficiency but apply the same approach to measuring each type of efficiency, which conflates the two. Practically, this creates a presumption of fundamental efficiency in the appraisal context once informational efficiency is established. Such a presumption is unjustified as a market’s ability to react to new information does not guarantee that the information will be priced correctly. This Comment proposes a refined framework under which courts first assess informational efficiency and then evaluate additional indicators of fundamental efficiency, including evidence of directional and proportional price reactions and the absence of arbitrage opportunities. By incorporating these additional indicators, this proposed approach preserves the role of market prices in appraisal proceedings while accounting for the different type of efficiency required in the securities context.
Volume 174 Issue 6 2026 Comment Securities Law;