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Indiana Law Journal

Document Type

Article

Publication Date

Fall 2025

Publication Citation

101 Indiana Law Journal 143

Abstract

In recent decades, courts have increasingly looked to trading prices as evidence—often conclusive evidence—in high-stakes corporate law disputes over a company’s fair value. This development has been especially dramatic, and consequential, in Delaware. Where a stock trades in an efficient market, the logic goes, the prevailing trading price can be used to resolve any disputed issue of valuation. But this expedient comes with an unavoidable question: When is a market “sufficiently efficient” for a court to rely on it as a measure of value?

 Federal courts have long experience evaluating the relative efficiency of trading markets in the context of securities fraud class actions. A set of criteria known as the Cammer-Krogman factors have become the standard test in federal court for evaluating whether a market is sufficiently efficient.

This Article argues that these factors imported from securities fraud disputes are poorly suited to the different task required in corporate litigation. In corporate litigation, unlike in federal securities fraud litigation, the key question is the overall value of the firm, and not simply the market reaction to a particular piece of information. As such, it is not enough to demonstrate that a market is efficient only in the sense of rapidly incorporating new information. What a corporate law dispute requires is some indication that the market is efficient in the sense of reflecting the true or fundamental value of the firm in question. In assessing whether a market is sufficiently efficient for the trading price to function as a proxy for fair value, Delaware courts looked almost exclusively at indicia of informational efficiency, as in the Cammer-Krogman factors.

Here, we develop in a systematic fashion a set of criteria that are sufficient to indicate fundamental value efficiency. The framework we articulate for corporate courts in valuation cases is analogous to the one provided by the Cammer-Krogman factors in securities fraud cases. Such a framework can help courts to better address the key question in corporate law disputes and thereby to generate more efficient social outcomes.

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