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Opinion
Matt Levine

There Will Always Be Stock-Drop Lawsuits

But only if there's a stock drop. Seems fair!

Every once in a while a company will announce bad news and its stock price will go down. When this happens, enterprising lawyers will sue the company, saying that it should have announced the bad news earlier and that innocent shareholders were tricked into buying stock because they didn't know about the bad news. These lawsuits are informally called "stock-drop lawsuits," and a lot of people think they're Bad, because they mostly are. So those people have tried, with mixed success, to get Congress or the Supreme Court to eliminate them.

Today the U.S. Supreme Court issued an important decision in a stock-drop lawsuit called Halliburton Co. v. Erica P. John Fund Inc. in which it ruled that there can still be stock-drop cases, but only if the stock actually drops. This seems sensible enough, but it comes wrapped in a hard candy shell of efficient-markets flummery, and I don't know what to tell you.