After a record slew of mergers, investors trading news of the deals are feeling jittery. Merger targets Activision Blizzard Inc., Spirit Airlines Inc. and Zynga Inc. are trading well below their agreed acquisition prices, a sign that investors are more worried than usual that deals could collapse. Their concern stems from a growing belief that global regulators are preparing to challenge more deals on antitrust grounds. Their fears came true earlier this week, when Nvidia Corp. and SoftBank Group Corp.. ‘s Arm canceled a $40 billion deal that regulators had challenged. Investors lost faith that the semiconductor giants would merge after the Federal Trade Commission filed a lawsuit to block the merger in December. But the jitters have since spread to other hit suits, including 2022’s biggest deal so far: Microsoft Body $75 billion contract for Activision. Shares of the video game maker are trading at around $82, 17% below Microsoft’s $95 per share bid. Merge targets tend to trade at a much smaller spread of 5% or less. “It’s not wildly out of a 50/50 implication to get the deal done,” said Steve Schlemmer, managing director of Churchill Capital USA, a research and brokerage firm. “That’s pretty low for a deal that would have looked okay a few years ago.” The wide spread reflects a new set of expectations about how regulators view big mergers. The deal would marry Microsoft’s gaming systems with a leading maker of games played on those systems. It’s the kind of acquisition that rarely raised eyebrows in the past, when regulators were more concerned about a deal’s effect on market share. Technology deals, in particular, are on the radar of regulators. Merger-arbitrage traders seek what is supposed to be safe money: they buy stocks after trades are announced, hoping to capture the last advantage when the trade closes. Delays associated with antitrust challenges hamper their ability to achieve a quick return, and hedging strategies increase their costs. Greg Bassuk, CEO of AXS Investments, said the uncertainty led his merger fund to change its trading strategy. “For deals with antitrust issues, we will intervene later instead of experiencing the ups and downs of the market,” Bassuk wrote in an email. Changing healthcare Inc. the sale to UnitedHealth Group Inc. is among those under antitrust review. Its stock is trading around 26% below the offer price. Investors are eyeing another video game deal: Take-Two Interactive Software Inc.it is $11 billion cash and stock deal for FarmVille maker Zynga. Zynga is trading about 7% below the deal’s per-share value. Spirit Airlines is trading about 7% below the price per share of Frontier Group Holdings Inc. A $2.9 billion cash and stock deal announced earlier this week. Arena Pharmaceuticals Inc. is about the same amount below the $6.7 billion in Pfizer cash Inc. agreed to pay the maker of treatments for inflammatory bowel disease in December. Termite Killer Terminix Global Holdings Inc. is trading about 10% below the price Rentokil Initial PLC would pay shareholders choosing cash and shares in the deal. Still, wider spreads can be an opportunity, said Salvatore Bruno, chief investment officer at IndexIQ, which runs a merger-focused exchange-traded fund. Last month, Advanced Micro Devices Inc. said it had obtained China’s approval to complete its purchase of Xilinx Inc., first announced in October 2020. Xilinx had traded up to 40% below its agreed price. Merger-arbitrage funds outperformed a broader hedge fund index in 2021 for the first time since 2018, according to industry data provider HFR. This trend continued in January. And companies are still doing business. M&A volume slowed slightly last month from December, but remained in line with January 2021 levels. SHARE YOUR THOUGHTS What is your outlook for M&A activity this year? Join the conversation below. Write to David Benoit at david.benoit@wsj.com Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8 Wj