Risks in Merger Arbitrage Strategy

In the landscape of hedge fund strategies, relative value strategies seek to exploit price discrepancies between related financial instruments. One such strategy is the merger arbitrage, where investments are typically made on the stocks of companies involved in a merger or acquisition. Consider the following scenario:

Company A agrees to acquire Company B for $100 per share, and Company B’s shares trade at $90 in the market. The merger is expected to close in six months. An investor allocates capital into this merger arbitrage strategy.

Which of the following risks does the investor face in this relative value strategy?