Shutterstock plunges after Getty abandons $3.7B merger

Shutterstock’s stock dropped roughly 30% in premarket trading after Getty Images said it would abandon a planned $3.7 billion all-stock merger, citing a condition from Britain’s Competition and Markets Authority that Shutterstock sell its editorial business. Getty’s shares fell more than 5% in early trading.

Getty filed Tuesday to terminate the deal after the CMA granted conditional approval in May but required Shutterstock to divest its editorial division. The regulator concluded the combined company would reduce competition in supplying editorial images to U.K. media organizations.

Getty and Shutterstock announced the proposed merger in January of last year. The companies had presented the deal as a way to cut costs and strengthen their positions as generative artificial intelligence changes how visual content is produced and distributed.

Regulatory filings noted the merger was expected to generate between $150 million and $200 million in annual operating and capital expense savings and to give the combined firm greater scale to respond to competition from AI image-generation tools. The CMA’s condition to force a sale of Shutterstock’s editorial unit was based on concerns that the tie-up would reduce customer choice and could raise prices for news organizations that license photographs and video.

Investor sentiment had briefly improved earlier in the month after Getty reached a display agreement with OpenAI to show Getty content within ChatGPT, a development that had lifted expectations for the partnership and for the merger’s prospects. Shutterstock shares had risen around 20% on that news before the deal collapse.

In a regulatory filing, Getty said it will officially terminate the merger after an extended July 6 deadline. The company plans to redeem its 10.5% senior secured notes due in 2030 and will retain a financial adviser to evaluate strategic financing alternatives. Getty’s board will review broader financing options for the company.

Luke Stillman, managing director at trend advisory firm Madison and Wall, observed: “We are not convinced that scale would have done more than stave off competitive pressures for a little while longer, but without the scale that the merger would bring, the outlook for each looks even more difficult.”

Shutterstock has faced recent financial headwinds. In April the company reported first-quarter sales of $199.2 million, down 17.9% year over year, and missed Wall Street revenue expectations, attributing the decline to weaker new customer acquisition. Both companies have seen competition from AI image generators that let users create visuals quickly and at lower cost than purchasing licensed images.

With the merger off the table, Getty is moving to shore up its finances and Shutterstock faces renewed investor pressure after the sharp share drop and its recent revenue slump. The companies will continue to operate independently while pursuing their respective financing and business plans.