Neuralink, a brain implant start-up founded by Elon Musk, has recently been valued at $5 billion in privately executed stock trades, according to five sources with knowledge of the matter. The valuation is a significant increase from its close to $2 billion valuation two years ago. The valuation of the company has been boosted by bullish investors ahead of the announcement of Neuralink’s human trial approval for its brain chip. The trial’s approval caused Neuralink shares to be marketed privately to investors, leading to the current valuation of $5 billion.
Despite the approval, experts predict that it may take several years for Neuralink to secure commercial use clearance. Furthermore, the company faces challenges, including federal probes into its handling of animal research. Neuralink’s ambitions are grand, with Musk stating that the chip would allow healthy and disabled people to treat obesity, autism, depression, schizophrenia, and even be used for web-surfing and telepathy. Neuralink’s executive has given more modest short-term objectives, such as helping paralyzed patients communicate through computerized text without typing.
The stock transactions at a valuation of around $5 billion have been carried out by shareholders such as employees and the company’s early backers, rather than Neuralink selling new shares to investors. Although such secondary trades are an imperfect gauge of a company’s value, the recent valuation jump at Neuralink is in stark contrast to other startups. Currently, 85% of pre-IPO companies are valued in secondary trades at an average discount of 47% to their last funding round, according to data provider Caplight.
Many of the recent stock sales have been to relatively small investors, who typically focus more on getting a slice of a company owned by Musk than scrutinizing its valuation. The maximum amount sought for the Neuralink shares marketed for sale at a $7 billion valuation was just $500,000. Demand for Neuralink stock has been tremendous, according to Sim Desai, chief executive of Hiive, an online platform where the shares are traded. He pegged the valuation that buyers are willing to pay at around $4.5 billion.
Despite the company’s valuation, some biomedical experts are skeptical. Arun Sridhar, a scientist and entrepreneur who specializes in neuromodulation, called Neuralink’s valuation “bonkers” based on how early the brain implant is in its clinical development. A study to assess safety and tolerability is not enough to justify a $5 billion valuation, according to Sridhar.
The FDA initially rejected Neuralink’s request for a human trial last year, citing safety reasons. Even after securing approval, the company faces several challenges. Neuralink has come under scrutiny from U.S. lawmakers after its animal research board may have violated conflict-of-interest regulations. The law enforcement arm of the U.S. Department of Agriculture is investigating Neuralink for potential animal-welfare violations. The Department of Transportation is separately probing whether Neuralink illegally transported dangerous pathogens on chips removed from monkey brains without proper containment measures.
Neuralink’s journey to a $5 billion valuation has been boosted by bullish investors ahead of the announcement of its human trial approval for its brain chip. Although the valuation is impressive, the company faces several challenges, including federal probes into its handling of animal research. Despite the skepticism from some biomedical experts, demand for Neuralink stock has been tremendous, with buyers willing to pay around $4.5 billion for the shares.
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