On September 15, I wrote up the merger arb opportunity in Shutterstock, slated to merge with Getty after 82% of shareholders voted in favor back in June. With a collective 50-70% global market share in the niche of stock media, the deal hadn’t flown by the nose of antitrust authorities (the DoJ was then on second request and the CMA had initiated a probe), and that hangover was what offered the deal spread on a platter: an almost 100% IRR in the Shutterstock common stock as it was set to close by year-end.
As I’ve said before, merger events aren’t really attractive if you don’t have a floor to catch you in a deal break. You can’t escape valuation work in different scenarios and handicapping market sentiment across outcomes.
In the case of Shutterstock/Getty, the market obviously wanted this deal to happen, seeing the merged entity’s fortified bargaining power with LLMs as a lifeline, leveraging Shutterstock’s fast-growing Data, Distribution, and Services business with Getty’s walled-garden AI tools as a defense against the onslaught of AI slop. In the writeup, I argued that, from a valuation standpoint, a normalized 7.1x EBIT multiple (compared to a headline 12x EBIT due to non-recurring retention compensation expenses related to Shutterstock’s 2023 acquisition of Giphy — a small but crucial accounting quirk) already incorporated a great deal of skepticism into Shutterstock’s future. And from a pricing standpoint, I noted that Shutterstock had traded at $30 per share right before the deal announcement (vs. ~$21 at the time) and had never traded below $27 per share before the antitrust scare hovered over it, except at the IPO in 2012. So the floor looked sturdier than headlines suggested.
And, as is the case with merger event-plays, the juiciest returns get harvested in the fog of uncertainty, when sentiment is fractured and information is stale.
Just two progressions have happened since my writeup: 1) Getty has secured financing, pricing a $628mn 10.5% senior note (which I described as an immaterial risk), and 2) the DoJ is rumored to have wrapped its competitor Q&A. But even so, these crumbs of clarity (the CMA is still days away from its Phase 1 ruling) have been enough for the Shutterstock common stock to return 27% in a month. The December 2025 $20 call is up 76%. Congratulations to those who bought.
For those still in on this, with Getty’s common stock up 15% since the original writeup, these are the fresh deal election options (defaulting to the mixed election due to proration):
- Mixed election ($9.5 in cash plus 9.17 shares of Getty common stock): 17.9% spread
- Cash election ($28.8487 in cash): 9.2% spread
- Stock election (13.67237 shares of Getty common stock): 22.2% spread
I’m currently writing up another absurd opportunity, to put it mildly. This company owns a stake in another listed company worth roughly twice its own market cap. Including net cash, its total market cap equals about one-third of the value of its non-operating assets — and the operating business doesn’t burn money. The market hasn’t caught up, likely because the reported book value is outdated. The company releases Q3 numbers in about a month with an imminently colossal fair-value adjustment flowing directly to the bottom line, soon to be reflected in its P/B and P/E multiples. I don’t think you want to miss this one. Keep an eye out for my email sometime this week (behind the paywall).
Cordially,
Oliver Sung