WILMINGTON, DEL. (CNN/Money) - A trial isn't over until the judge rules. Investors, on the other hand, rule every minute the market is open.

And the market is providing a pretty good running commentary on how Walter Hewlett's suit against the company his dad co-founded is playing out in a Delaware courtroom. The short answer is, not well. But we'll come to that in a bit.

Wall Street's vote on this legal matter is the spread between the value of Compaq's (CPQ: Research, Estimates) shares and the value Compaq's shares would have if the merger with Hewlett-Packard (HWP: Research, Estimates) goes through.

Once the deal is completed, the spread will naturally be zero. In the meantime, anything greater than that reveals the amount arbitrageurs are betting the deal won't happen.

Before the trial began in Chancery Court here Tuesday morning, the spread was about 83 cents. When Walter Hewlett's lawyer, Steve Neal, began intense and intimidating questioning of HP CEO Carly Fiorina, the spread widened, ending the day at $1.59, a gaping yawn for a deal that's supposed to close on or around May 7.

Indeed, it really did look like Fiorina was in trouble. Neal had unearthed a couple of documents called "value-capture" reports prepared by HP and Compaq's merger integration teams. The documents suggested HP was badly missing its targets and, worse, wasn't telling its own board or its shareholders about the problems.

Neal, the son of a retired law school dean, and Fiorina, daughter of a retired federal judge, locked horns repeatedly for hours Tuesday, with Neal taunting her with jokes and Fiorina agreeing only that Neal's math -- not his inferences -- were correct.

The tide turned considerably as HP's lawyer, Boris Feldman, began his friendly questioning of Fiorina. Veteran Carly watchers noted how the personable CEO lightened up and started to become her confident, numbers-commanding, cheerful self. Fiorina explained that the now-infamous reports were merely snapshots, not forecasts. But the afternoon questioning continued after market hours, and most arbs -- and all the press -- were locked in the courtroom, painfully separated from their cell phones and Blackberries.

But by Wednesday morning, word had gotten out that HP was explaining itself well, particularly its chief financial officer, Bob Wayman, who successfully went on the humor offensive against Neal, Hewlett's lawyer. When Neal confused billions with millions, Wayman teased the lawyer for not being good with numbers, the CFO's specialty. Wayman gave further details on why the value-capture reports were incomplete and definitely not forecasts.

By day's end, when a confused Walter Hewlett had taken the stand, sometimes not able to answer his own lawyer's questions, the spread had closed to 53 cents.

The arbs -- and nearly every non-journalist in the courtroom either is an arb or a lawyer working for arbs -- clearly feel the trial is over. Neal needs to convince the judge the value-capture reports are material forecasts that should have been shared with shareholders. But it's a tough sell, with one day of the trial left to go.

"There definitely is a smoking gun," says Thomas Isenberg, a lawyer for P. Schoenfeld Asset Management in New York. "The question is, What kind of bullets is it shooting? And do they just bounce off of Carly?"

Incidentally, the issue of vote-buying is largely moot here because even Walter Hewlett's lawyer told the judge Tuesday the evidence is circumstantial. That doesn't mean the issue is dead. HP's Wayman disclosed today that HP signed up Deutsche Bank in mid-February to provide it advice on the proxy process. It already was known HP was paying Deutsche, whose asset management arm belatedly changed its votes to favor the merger, $1 million for its help.

Wayman said HP also agreed to an additional $1 million success fee if the merger is completed. Interestingly, Wayman acknowledged that he dealt primarily with the commercial side of Deutsche Bank, who are not the folks managing its money. That implies a breach in the so-called Chinese wall at Deutsche Bank. If true, that's not likely Bob Wayman or HP's problem. But Eliot Spitzer, the litigious politician in New York, might be very interested indeed in what comes out of this trial.

Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at adam_lashinsky@timeinc.com.

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