The deal spread on Microsoft Corp.’s proposed takeover of Activision Blizzard Inc. is blowing out as traders worry that the $69 billion merger will collapse after UK antitrust regulators vetoed the combination.

Shares of the video-game maker slumped more than 10% to around $77.50 in premarket trading on Wednesday, moving further away from Microsoft’s $95-per-share offer. That puts the gap at roughly $17.50, compared with $8.26 Tuesday.

Although Microsoft is expected to appeal the ruling, traders and analysts see the UK ruling as a deal-ender.

“Essentially, there has never been a successful appeal in the UK on an antitrust decision,” said Aaron Glick, a merger arbitrage strategist at TD Cowen. “There does not appear to be a path forward for Microsoft.”

The UK Competition and Market Authority isn’t alone in disputing the deal. The US Federal Trade Commission has already sued to block, and it still needs clearance from the European Commission and China.

Antitrust scrutiny was seen as a major regulatory hurdle for Microsoft’s takeover. In March, the UK narrowed the scope of its probe, lifting traders’ optimism and sending the deal spread to its lowest level since the merger announcement.

Read: Microsoft’s $69 Billion Activision Deal Blocked by UK (1)

The deal has been the center of attention for the merger arbitrage community since it was announced in January 2022. It is the largest pending transaction in the US, standing out at a time when traders have been facing a market stuck in the doldrums, with mostly smaller and private equity deals announced this year.

Activision is scheduled to report earnings on Thursday after the bell. The deal’s closing deadline is July 18.

--With assistance from Matt Turner.