1. That it won't happen or some delay. Garden variety "a bird in the hand is worth two in the bush" uncertainty.
2. Time value. The stock market, extremely generally speaking, has a required rate of return of around 12%. If this deal takes 4 months, then that would be 3.81% of a time value discount from then to know. As that date approaches, this discount will decrease. The uncertainty discount (1) will also decrease as the deal and details become more and more certain.
What is certain is that $40/37.85-1 = 5.68% (the amount left to earn). The sum of the two premiums I listed = 5.68%. The ambiguity is how much each factor contributes (but does it matter?).
Also, people buy and sell for completely unmarkety reasons (withdrawals/contributions for personal reasons, reweighting a portfolio, etc.), so that moves the price, but usually only in short-term spurts.
In closing, there are actually funds that are designed to take advantage of this time period MMI is in right now. It's usually a predictable return, you're investing in companies that don't really go up and down with the market unless it affects the possibility of the deal. But sometimes, it hits the fan and the deal doesn't happen, hence the reason 1 premium.
With interest rates at zero the time value of money is pretty small considering current economic conditions, the ftc still has to a prove this one, I'd say the main reason is the street anticipates a 5% probability the deal won't get approved. Also anyone notice the dollar drop today and a drop in mmi? A weaker future dollar means a weaker 12.5 billion. I'm holding, this is a cash deal, save your commissions, also the walk-away fee is huge, something like 2.5 billion? Indicates to me both parties have extreme confidence in the deal.
Time Value is born in each of our minds. Would you rather have $38 now or wait 4 months for $40? Some people are making that decision to just take the $38 and do something else with it. The time value discount is something each person decides for themselves. We are seeing the sum of those thoughts play out on the price of this stock. Why did the stock price of MMI go down today? Did investors lose confidence in the deal? Some people just wanted to out now- for rational reasons or otherwise.