Event-Driven Hedge Fund Risk Factors

XYZ Hedge Fund employs an event-driven investment strategy, focusing on opportunities arising from corporate events such as mergers and acquisitions, restructurings, and corporate bankruptcies. Recently, the fund scrutinized an upcoming merger between two public companies, A and B, which is expected to be completed by the end of the fiscal quarter. The merger has drawn significant attention due to regulatory scrutiny and market conditions. As the manager reviews the potential risks and rewards, he is aware that event-driven strategies can often lead to unique challenges.

Given the event-driven nature of this strategy, which of the following is the most likely risk associated with the hedge fund’s investment focused on the merger between companies A and B?