Bill Gross is sticking with his wager on Capri Holdings Ltd. even as traders worry that a proposed takeover of the Michael Kors parent won’t win regulatory approval.

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“I still like CPRI for a merger arb,” the co-founder and former chief investment officer of Pacific Investment Management Co. wrote in a post on social media platform X on Monday.

The merger-arbitrage strategy involves betting on the outcome of corporate takeovers, in this case Tapestry Inc.’s August cash offer to buy Capri for $57 a share. The stock traded at about $50 on Tuesday, a roughly 12% discount from the offer by Tapestry, which owns fashion brands including Coach. It’s a signal that the market sees a decent chance that the $8.5 billion transaction will falter.

Gross, who didn’t immediately respond to an emailed request for comment through a spokesperson, cited Capri as one of his “best bets” in arbitrage situations in an October outlook.

However, the shares started to slide in November, falling as low as $46.59 intraday that month and blowing out the gap below the takeover offer to more than $10 — the widest since the deal announcement.

The decline came as the Federal Trade Commission issued a request for additional information as part of a probe into the deal. Adding to the concern, Capri reported weaker-than-expected earnings as spending on luxury brands suffered, a backdrop that also led traders to reassess Capri’s standalone value.

At current levels, the market-implied probability of the deal succeeding is about 85%, according to Cabot Henderson, a merger-arb specialist at Jones Trading. The calculation is based on an assumption that the stock will drop to $28 to $29 if the merger fails, he said.

In October, Gross was confident in the merger. It’s in a “relatively safe industry,” unlike high-tech combinations that typically get tougher antitrust reviews, he said in an emailed response to questions at the time. He called it the best example of a sizable discount on a deal that might take six to nine months to close.

The former bond king said last year that merger-arb investments were attractive because their performance isn’t necessarily correlated with the economy or stock market. This week, he also called 10-year US debt “overvalued.”

Several of the merger-arb wagers he pointed out last year panned out: the sale of video game-maker Activision Blizzard Inc. to Microsoft Corp.; Pfizer Inc.’s purchase of Seagen Inc.; and software maker VMware Inc.’s acquisition by Broadcom Inc.