On November 30, 2019 (at 7AM), Firm A and Firm B announced a merger agreement noting that:

• The merger was expected to be completed by June 2020; and

• 7.4 shares of Firm As stock were expected to be paid for each share of Firm Bs stock (i.e., each share of Firm B can be swapped for 7.4 shares of Firm A if the merger is completed).

On November 30, 2019 (at 4PM):

• Firm As stock closed at $15 per share; and

• Firm Bs stock closed at $91 per share.

Identify a risk arbitrage opportunity arising from the merger agreement announcement. You need to note:

• Which stock and the amount of shares (if any) that you are buying;

• Which stock and the amount of shares (if any) that you are short-selling; and

• The profit arising from the risk arbitrage opportunity.