An anonymous reader shared this report from Forbes:
On November 20, at approximately 4 p.m. Eastern time, Napster held an online meeting for its shareholders; an estimated 700 of roughly 1,500 including employees, former employees and individual investors tuned in. That's when its CEO John Acunto told everyone he believed that the never-identified big investor — who the company had insisted put in $3.36 billion at a $12 billion valuation in January, which would have made it one of the year's biggest fundraises — was not going to come through.
In an email sent out shortly after, it told existing investors that some would get a bigger percentage of the company, due to the canceled shares, and went on to describe itself as a "victim of misconduct," adding that it was "assisting law enforcement with their ongoing investigations." As for the promised tender offer, which would have allowed shareholders to cash out, that too was called off. "Since that investor was also behind the potential tender, we also no longer believe that will occur," the company wrote in the email.
At this point it seems unlikely that getting bigger stakes in the business will make any of the investors too happy. 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 in a tender offer that would change everything. In fact, it was the fourth time since 2022 they've been told they could soon cash out via a tender offer, and the fourth time the potential deal fell through. Napster spokesperson Gillian Sheldon said certain statements about the fundraise "were made in good faith based on what we understood at the time. We have since uncovered indications of misconduct that suggest the information provided to us then was not accurate."
The article notes America's Department of Justice has launched an investigation (in which Napster is not a target), while the Securities and Exchange Commission has a separate ongoing investigation from 2022 into Napster's scrapped reverse merger.
While Napster announced they'd been acquired for $207 million by a tech company named Infinite Reality, Forbes says that company faced "a string of lawsuits from creditors alleging unpaid bills, a federal lawsuit to enforce compliance with an SEC subpoena (now dismissed) 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, and its anonymous $3 billion investment that its spokesperson told Forbes in March was in "an Infinite Reality account and is available to us" and that they were 'actively leveraging' it..."
And by the end, "Napster appears to have been scrambling to raise cash to keep the lights on, working with brokers and investment advisors including a few who had previously gotten into trouble with regulators.... If it turns out that Napster knew the fundraise wasn't happening and it benefited from misrepresenting itself to investors or acquirees, it could face much bigger problems. That's because doing so could be considered securities fraud."
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