Why is Wall Street/investors expecting it to fall? Cause of the bad quarter/stock price or the new bullish FTC?
It's not so much that they expect it to fail as that's it not perceived to be the absolute locked-in certainty that would see its share price trading closer to the offer price. There is a degree of risk being priced in, but that doesn't mean people necessarily think it will fail... just that there's a degree of uncertainty. And that higher degree of risk is due to FTC/regulatory concern.
It's being rounded out in the headline as 'market expects this to fail', but I think the reality is about degrees of risk and uncertainty, rather than any great certainty about it failing.
Why would shares ever trade for what Microsoft is going to buy them at?
They wouldn't, but they're apparently at a significant discount vs the offer price compared to other acquisitions in recent years.
None of this is new though, wrt the discount and what it means about market sentiment... it's been like this since the acquisition was announced - I think Bloomberg is just noting it again because there's another milestone in the process today, in the shareholder vote (which is fully expected to pass).