Second Circuit Holds That Delayed, Market-Tracking Stock Drop Dooms Loss Causation

On June 26, 2026, the Second Circuit affirmed the dismissal of a securities fraud claim, holding that a plaintiff must plausibly explain why a stock price decline that was delayed and merely tracked the broader market was caused by the alleged fraud rather than by intervening market forces.

In Huey v. Anavex Life Sciences Corp., the Second Circuit affirmed the district court's dismissal with prejudice of a putative class action under Section 10(b) of the Securities Exchange Act of 1934 for failure to plausibly plead loss causation.

The plaintiff alleged that Anavex, a biopharmaceutical company, and its then-CEO misled investors by implying that the U.S. Food and Drug Administration had approved their methodology for measuring a drug's efficacy in clinical trials. However, on the day the defendants purportedly corrected the alleged misrepresentation in a disclosure, Anavex's share price rose 5.8%. The price then declined by 7.0% and 4.8% over the next two days. But those declines