Forbes reports that Napster CEO John Acunto informed an estimated 700 out of 1,500 shareholders during an online meeting that the mysterious investor who had supposedly put in $3.36 billion at a $12 billion valuation in January, was not going to come through. This investment would have made it one of the year’s biggest fundraises. In an email sent shortly after the meeting, the company described itself as a “victim of misconduct” and stated that it was assisting law enforcement with ongoing investigations. The news is ironic, since Napster began life as the most popular site to access pirated music on the internet.
The promised tender offer, which would have allowed shareholders to cash out, was also called off. The company had been stringing its employees and investors along for nearly a year with ever-changing promises of an impending cash infusion and chances to sell their shares. This marks the fourth time since 2022 that investors have been told they could soon cash out via a tender offer, only to have the potential deal fall through.
Forbes had raised concerns about both the investor and the firm months ago when Napster, then called Infinite Reality, reached out announcing its $3 billion financing round. CEO John Acunto even claimed at a live event in Los Angeles in February, “Do you really think that we would talk about $3 billion dollar investments and be one of the largest companies in our space if we really weren’t doing what we’re doing?”
However, Forbes’ investigation into the company revealed a string of lawsuits from creditors alleging unpaid bills, a federal lawsuit to enforce compliance with an SEC subpoena, and exaggerated claims about the extent of their partnerships with Manchester City Football Club and Google. The company also touted “top-tier” investors who never directly invested in the firm.
The convoluted recent history of Napster dates back to 2019 when Acunto bought a bankrupt social media company Tsu. That entity merged with or acquired at least a dozen metaverse, virtual reality, drone, and AI companies, largely paid for in all-stock mergers at higher and higher valuations. In March, it acquired Napster for $207 million and rebranded itself, using the much higher-profile name, in May.
On the day Forbes published its first story about Napster’s questionable funding round, Napster put out a press release claiming to reveal the investor’s identity as advisory firm Sterling Select. However, it was later clarified that Sterling Select was not the investor but had introduced Napster to other “investors” who were supposed to write the checks.
As weeks passed, few signs of a big investor emerged, and more lawsuits alleging nonpayment were filed. In July, an estimated one-third of the staff was laid off. Napster appears to have been scrambling to raise cash to keep the lights on, working with brokers and investment advisors, some of whom had previously gotten into trouble with regulators.
Read more at Forbes here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship.
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