10 Million Long vs 20 Million Short, suggests 20% of CYBR held by risk arbitrageurs.

Palo Alto Networks (PANW) is acquiring CyberArk (CYBR) for $45 in cash and 2.2005 PANW shares per CYBR share. The transaction is structured as approximately 90% stock-based consideration and 10% cash.

The deal is valued at approximately $25 billion and is expected to close in 2026, pending regulatory approvals.

Merger arbitrageurs would typically short 2.2005 PANW shares for each CYBR share they purchase—hedging against the stock portion of the acquisition.

PANW shares fell nearly 15% over the three days following the deal announcement, partially driven by surging merger arbitrage-related short interest. PANW’s short interest doubled from 4% to 8% of float, now totaling approximately 23 million shares sold short, according to S3’s real-time short interest data.

This implies that risk arbitrageurs currently hold around 10 million CYBR shares, or roughly 20% of CYBR’s float—a figure consistent with MAP’s reported long hedge fund ownership data. MAP is S3’s proprietary dataset which provides various types of long interest data for equities.

This is not a net short or naked short in PANW, as the position is hedged by long CYBR shares. It should not significantly impact PANW’s price—unless the deal breaks, leaving the short exposure unhedged.

As CYBR’s price has climbed on the deal premium, some investors have initiated directional shorts, betting on deal risk or downside volatility.

With the deal premium pushing CYBR closer to its implied acquisition value, traditional valuation metrics have taken a back seat. Analyst sentiment has shifted from unanimous “Buy” ratings to a more balanced 50/50 split between “Buy” and “Hold,” as CYBR now trades near its revised target price.

If the deal proceeds as expected, PANW’s elevated short interest should unwind organically, without triggering a broader market dislocation.

Since CYBR is not in the S&P 500 but PANW is, new PANW shares issued in the deal will be absorbed by index funds, creating passive demand. Approximately 10% of the newly issued PANW shares—roughly 10 million—are expected to be purchased by S&P index funds, contributing to passive inflows and potential support for PANW’s stock price.

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