Disturbing Images and Character Flaw
Below is our initial take on recent bankruptcy-related developments:
Getty Images files for US bankruptcy, advances restructuring plan | Reuters
Getty Images has filed for Chapter 11 bankruptcy, formalizing restructuring plans unveiled more than a week ago as part of the company’s plan to go private. The company had previously planned to merge with Shutterstock, but the deal collapsed due to debt and growing competition. Currently, affiliates of the Getty family and Koch Equity Development, which committed $533 million in new equity, will own 100% of the company after restructuring.
S&K Take: Getty filed the bankruptcy that the company previewed a week earlier (purportedly to stave off creditor uncertainty about the company’s direction), seeking to implement an RSA and prepackaged plan agreed to by a large majority of creditors. The restructuring was precipitated by the failed Shutterstock merger and litigation with warrant holders. The plan would see secured lenders paid down in part and rolled into new instruments in part, unsecured note holders paid out at 63% of face, GUCs riding through, and warrant claimants and other purportedly subordinated claimants getting a goose egg. The plan would be funded by a $433 million equity contribution by the Getty and Koch equity interest holders ($143 million of that coming in through the DIP). The deal has fairly broad support with the very notable exception of those warrant holders and minority equity holders that get wiped. They are looking to form an equity committee and to challenge the restructuring. More to come I would suspect.
Character.AI files for bankruptcy, to sell some assets to Disney for $20 million | Reuters
Character.AI has filed for bankruptcy, sharing that they have agreed to sell a portion of their assets for $20 million to The Walt Disney Company. Court filings state the artificial intelligence company hopes to use its bankruptcy to reach a global resolution on all of its legal claims including those launched by US states, international regulators, as well as private lawsuits alleging that the company’s chatbots pushed children to suicide and self-harm.
S&K Take: Is this the first AI bankruptcy? Hard to say that this is a failure considering shareholders licensed the business (or at least the large language model technology) to Google in 2024 for $2.7 billion. After that transaction, the company transitioned to “consumer applications” of AI, including chatbots that acted as AI-generated companions. The company couldn’t get past computing expenses ($56.1 million in 2026 to date) and litigation over lack of safety controls with respect to the company’s creations and their interactions with minors. The bankruptcy has a stalking horse in Disney which would provide $20 million in sale proceeds and hire the majority of the company’s workforce. The case raises some serious safety and regulatory issues, so we will keep an eye on how those are ultimately addressed.
