How will the investigation affect DNOW's merger timeline and likelihood of completion?

Impact on the merger timeline

The Halper Sadeh investigation adds a fresh layer of regulatory and fiduciary scrutiny to DNOW’s pending merger with MRC. In practice, such shareholder‑rights probes often trigger a “hold‑the‑line” period while the target and acquirer gather documentation, respond to information‑request letters and, if necessary, defend the deal in a securities‑law forum. Expect a 2‑4‑week delay at a minimum, with the potential for a longer extension if the firm uncovers material misstatements or breaches that require board‑level remediation or even a re‑negotiation of deal terms. Historically, comparable investigations have slowed the closing process by 10‑15 % of the original timeline, so a mid‑July target could realistically slip into early August.

Likelihood of completion

The investigation raises the probability that the merger will encounter a “deal‑risk” event—either a material amendment, a shareholder‑vote postponement, or, in the worst case, a termination. Given the negative sentiment (‑70) and the fact that the probe is being conducted on behalf of shareholders, the market is already pricing in a 15‑20 % discount to the announced premium. If the investigation uncels any breach of fiduciary duty (e.g., inflated valuation, undisclosed conflicts), the likelihood of completion could fall from the typical 90 % baseline for a announced M&A to ≈70 % until the firm provides a clear resolution.

Trading implications

* Short‑bias with defined risk – A 2‑3 month “protective put” or a bear put spread (e.g., buy a put at the current 2‑week low, sell a put 2‑3 strikes lower) captures upside if the deal stalls or collapses while limiting exposure to a possible quick resolution.

* Hedged long – If you remain bullish on the long‑term combined entity, consider a long‑call with a stop‑loss near the recent swing low (≈ $0.85) and a protective put at the same level to cap downside while the investigation runs its course.

* Monitor catalysts – Watch for SEC filings, board‑meeting minutes, or a press release from DNOW or MRC addressing the probe. A clear “no‑material‑impact” statement should trigger a bounce back toward the pre‑investigation price, while any admission of material concerns will likely push the stock into a deeper downtrend.

In short, the investigation is expected to delay the merger and downgrade the probability of completion, creating a near‑term bearish bias with heightened volatility. Position accordingly, but keep a tight watch on any corporate disclosures that could either clear the hurdle or exacerbate the risk.