CMA's Mixed Verdict on Shutterstock-Getty Merger Adds Regulatory Uncertainty

What happened

The UK Competition and Markets Authority (CMA) issued a provisional report on the proposed Shutterstock-Getty Images merger, a key regulatory overhang highlighted in prior analyses. While the CMA found no competition concerns in the global stock content market, it provisionally concluded the merger could substantially lessen competition in the UK editorial market. Shutterstock's statement selectively praises the global clearance but downplays the UK issue, reflecting corporate spin amid intense antitrust scrutiny. This mixed outcome underscores the regulatory risk that has depressed Shutterstock's stock, as noted in the DeepValue report's watch items for the merger's antitrust outcome. The CMA's focus on the UK editorial segment suggests potential remedies or delays, complicating the merger's path and maintaining investor uncertainty.

Implication

Investors should expect increased scrutiny on the UK editorial market, likely forcing Shutterstock and Getty to propose remedies like asset sales to secure approval. This aligns with the DeepValue report's warning that regulatory outcomes are critical to the investment thesis, with clean approval needed to strengthen the upside case. The provisional UK finding could embolden other regulators like the DOJ to impose stricter conditions, adding layers of uncertainty. Short-term stock volatility may persist as the market assesses merger completion odds and associated costs. Long-term, if the merger proceeds with remedies, it could cap the combined entity's pricing power and growth in key markets, impacting valuation.

Thesis delta

The CMA's interim report introduces a concrete regulatory hurdle in the UK editorial market, slightly increasing the risk of onerous remedies or merger delays beyond prior expectations. However, the global clearance aspect supports the strategic rationale for the merger, keeping the overall POTENTIAL BUY stance intact but with heightened caution on execution risk and potential dilution of synergies.