Puzzling Metaverse Company Just Renamed Itself Napster

A Florida-based upstart called Infinite Reality held a private investors-only Zoom meeting on May 15, at which it told some of its 1,500 shareholders that it was rebranding itself as Napster Corporation, a nod to the peer-to-peer file sharing application cofounded in 1999 by Facebook’s first president and now billionaire Sean Parker. (He’s no longer affiliated with Napster.) The once-revolutionary app, which had some 75 million users at its peak, declared bankruptcy in 2002 after a U.S. copyright infringement ruling. It has since bounced around, picked up by Roxio, then Best Buy and later repackaged as a Spotify rival, recently ranking just 39th among music apps, Data.AI.

Infinite Reality, which had been pitching itself until recently as a metaverse shop, acquired music-streaming company Napster in a $207 million deal in March. At the time, Napster had unpaid royalty fees of more than $56 million; its CEO Jonathan Vlassopulos resigned last week. Now Infinite Reality is rebranding itself as Napster, a provider of “AI-powered digital experiences.”

In that same call, the company told investors of a new plan for them to get liquidity, explaining that they could sell back their shares at $20 a pop (before fees) starting in June, thanks to an unidentified investor. Assuming Infinite Reality’s share count hasn’t materially changed in the last couple of months, that would imply at least $18 billion valuation—or more than 240 times its $75 million revenue last year.

This is not the young company’s first rebranding. John Acunto and some investors bought bankrupt social media Tsu in 2019. Later renamed Display Social, it brought in just $150,000 in revenue for the first three years combined. Acunto pivoted the company again in 2022 when he acquired production company Thunder Studios and nascent firm Infinite Metaverse in an all-stock deal for $235 million in January 2022. With a new name, Infinite Reality went on a shopping spree, picking up nine more companies, each one boosting the firm’s valuation.

_{Got a tip for us? Contact reporters Phoebe Liu at [email protected] and +1 678-834-4200 for Signal or WhatsApp, and Iain Martin at [email protected] or +1 646-739-6427 for Signal or WhatsApp.}

It’s the fourth time since 2022 that Infinite-Reality-now-Napster has promised to let investors cash out, but so far none have panned out. Around the same time the company rebranded as Infinite Reality, it also filed paperwork with the SEC to go public via a reverse merger. That fell through in December 2022. Two weeks later came an agreement to go public via SPAC, but that didn’t happen either. (It began termination of the agreement in December, and the blank-check company is suing Napster over an alleged $7 million unpaid termination fee.) In January, shortly after announcing $3 billion in funding from an anonymous investor, the company announced a secondary share sale through Nasdaq Private Market, a trading platform for private company share sales.

In a February investor call when he discussed the Nasdaq Private Market deal, CEO John Acunto boasted about how much wealth the company had created for its shareholders. “We have over 600 millionaires as a result of their investment in Infinite Reality,” Acunto said. “I want to remind you that our job is not just to create a great company, but to create value for our shareholders … and give you an opportunity to get that value extracted from the market.”

But some shareholders were pretty jaded by this point. “When I heard about the secondary market set of transactions, I was like, oh, cool, the latest in a line of things that’s never going to materialize,” says a shareholder and former employee of the Nasdaq Private Market deal.

It turned out they had good reason. First, the Nasdaq Private Market webpage to trade Infinite Reality shares was taken offline, then the deal was called off as of May 7, according to Gillian Sheldon, Napster’s head of communications, who claimed that it was a mutual decision made by Napster and the trading platform. Nasdaq Private Market didn’t respond to a request for comment and directed multiple shareholders’ inquiries to Infinite Reality (now Napster).

The latest promise to let investors sell shares appears to center around an anonymous investor represented by brokerage firm Cova Capital. According to its website, the Long Island-based firm has worked on transactions with Palantir, SpaceX and AI startup Cohere. Broker-dealer watchdog Financial Industry Regulatory Authority fined Cova $30,000 in March this year for recommending three private share sales to retail investors without “conducting due diligence sufficient to form a reasonable basis to believe that the offerings were suitable for, or in the best interest of, at least some investors.” That included claims that Cova didn’t do enough to make sure the issuer actually had the rights to the shares or determine how much the shares had been marked up; Cova paid the fine “without admitting to or denying the findings.”

“We represent an investor who has executed an indication of interest to make an offer to existing shareholders that will afford shareholders of record on May 31st, two weeks from today, a liquidity opportunity,” Edward Gibstein, CEO of Cova, told Napster investors on the May 15 call. Gibstein added that the investor had signed a letter of intent. Kendall Cluff, an account executive at cap table management firm Carta (which is set to administer the transaction), said that “we don’t know the exact amount of seller interest until we run the transaction, but we expect that it would end up being a multi-billion dollar transaction.”

Cova and Napster have a relationship going back to 2021, per Gibstein—before it embarked on a string of headline-grabbing all-stock transactions for startups like Landvault and the Drone Racing League. An SEC filing tied to Napster’s July 2024 fundraise also lists Cova as the broker.

Around that time, Cova was trying to pitch six-month, high-interest (33%) loans with warrants to purchase Napster stock at a “discounted” valuation of $1.25 billion, per documents viewed by Forbes. That same document indicated that if the company raised $20 million or more in equity funding before the loan was due, the investor could choose to get paid back early, at a lower interest rate. Per that document, that should have kicked in back in July, when Napster raised $350 million and in January, when the company said it raised $3 billion. But two investors who say they signed similar documents told Forbes they haven’t yet been repaid. Five investors sued Napster in May alleging nonpayment of such loans, even after they sent the company a notice of default in December. A Napster spokesperson said the notes are in “various stages of repayment.”

Cova CEO Gibstein didn’t respond to a request for comment on this latest deal, but he did comment on May 15, hours before announcing the offer to shareholders. At the time, Forbes was trying to figure out who had reportedly invested $3 billion in then-Infinite Reality at a $12 billion valuation. Gibstein wouldn’t disclose the investor’s identity, citing a non-disclosure agreement, but said he was a Cova client and confirmed that the company’s big fundraising was “not a debt transaction.”

After Forbes published an investigation about Infinite Reality (now Napster) and its anonymous investor in April, the company issued a press release 90 minutes later, stating that “following high media interest, Infinite Reality’s $3B investor has come forward” and that Sterling Select, a New York venture development firm represented “the significant $3 billion investment.” The press release was later amended to clarify that Sterling Select “represents the investor,” but it never did reveal the investor’s identity. The company’s chief marketing officer KaringaKogan later told Forbes that Sterling Select isn’t the $3 billion investor, but that it introduced Napster to “investors” who in turn wrote the checks. Sterling Select did not respond to multiple requests for comment.

All of this is just the latest chapter in the saga of a puzzling company. For many investors, the chance to cash out in June can’t come soon enough. Many of these individuals have little experience in startup and tech investing and wrote checks as small as $50,000, hoping Napster would be the next big thing. “Are these guys scam artists, or did I get very lucky to get into the next greatest company in AI?” a shareholder wrote to Forbes. In response, Napster’s head of comms Sheldon wrote that “the many individuals we have spoken to since our internal investor update are very pleased with the liquidity offer, and we’re happy to say they represent the overwhelming majority.”

Another shareholder told Forbes that their broker “can’t find me a buyer at my cost of under $2” per share, let alone $20, as recently as last week. His broker? Cova’s Gibstein.