According to today's FT, Dow Jones and Rupert Murdoch's News Corp appear to be close to finalising a deal. But what does the short interest in Dow Jones (Ticker DJ) tell you about what people think about the deal? The chart since March 26th 2007 tells an interesting story. Underlying levels of short interest were running at a high level of 45% before Murdoch announced their $5bln offer in mid-April. On the day when the offer was announced, some shorts lost their nerve and closed out positions for a loss. At the same time, or on the following day prime brokers realised that this was by no means a done deal and they pre-borrrowed or 'iced' significant numbers of shares in case merger arb. players decided they wanted to go short DJ. This spike in short interest was rapidly closed off as prime brokers returned DJ stock to custodian banks as the market decided that the deal would close.