Musk's Neuralink valued at about $5 bln despite long road to market

NeuroPace

05/06/2023 11:00

By Rachael Levy, Krystal Hu and Marisa Taylor
       June 5 (Reuters) - Elon Musk's brain implant startup
Neuralink, which was valued at close to $2 billion in a private
fundraising round two years ago, is now worth around $5 billion
based on privately executed stock trades described to Reuters by
five sources with knowledge of the matter.
    Some purchases by bullish investors boosted the valuation in
recent months, ahead of Neuralink's May 25 announcement that
U.S. regulators had approved a human trial on its brain chip,
the sources said.
    Experts have said it could take several years for Neuralink
to secure commercial use clearance. Kip Ludwig, former program
director for neural engineering at the U.S. National Institutes
of Health (NIH), said he "optimistically" expected Neuralink to
take at least 10 more years to commercialize its brain implant.
The company also faces other challenges that include federal
probes into its handling of animal research. 
    Following the trial's approval, however, Neuralink shares
were marketed privately to investors in recent days at a $7
billion valuation, equivalent to $55 per share, according to an
email seen by Reuters. Reuters could not establish whether the
seller found buyers for that price. The email cited the U.S.
Food and Drug Administration's (FDA) approval of the clinical
trial as grounds for the deal being "sweeter." 
    Neuralink executives and Musk did not respond to requests
for comment. 
    Musk has expressed grand ambitions for Neuralink, saying its
chip would allow healthy and disabled people alike to pop into
neighborhood facilities for speedy surgical insertions of
devices to treat obesity, autism, depression and schizophrenia.
He even sees them being used for web-surfing and telepathy. A
Neuralink executive recently gave 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. Such so-called secondary trades are an
imperfect gauge of a company's value; their volume is thin and
they lack the wider market consensus of a fundraising round or
initial public offering (IPO). 
    Neuralink's valuation jump in secondary trades is in sharp
contrast to other startups. About 85% of pre-IPO companies are
currently valued in secondary trades at an average discount of
47% to their last funding round, according to data provider
Caplight.
    In Neuralink's last known fundraising in 2021, it raised
$205 million at an approximately $2 billion valuation, according
to data provider Pitchbook. 
    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, according to the
email seen by Reuters.
    Sim Desai, chief executive of Hiive, an online platform
where the shares are traded, said demand for Neuralink stock has
been "tremendous." He pegged the valuation that buyers are
willing to pay at around $4.5 billion.
    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 in no shape or
form valid to justify a $5 billion valuation," said Sridhar, who
helped launch Galvani Bioelectronics, a developer of implants
backed by GSK Plc  GSK.L  and Alphabet Inc's  GOOGL.O  Verily
Life Sciences. Galvani is not a competitor of Neuralink because
its implants under development will be installed in an artery to
the spleen to help treat rheumatoid arthritis, rather than the
brain. 
    
    INVESTIGATIONS
    The FDA initially rejected Neuralink's request for a human
trial last year, citing safety reasons, Reuters has reported.
Even after securing approval, the company faces several
challenges.
    Neuralink has come under scrutiny from U.S. lawmakers after
Reuters reported in May that its animal-research board may have
violated conflict-of-interest regulations. Neuralink employees
who sat on that board, which oversees the welfare of the animals
that were being tested, also stood to benefit from the implant's
quick development. Neuralink stock that some of the employees
hold has jumped around 150% in value in just two years, based on
the secondary trades.
    The law enforcement arm of the U.S. Department of
Agriculture has been investigating Neuralink for potential
animal-welfare violations. Neuralink staff told Reuters last
year that the company was rushing and botching surgeries on
monkeys, pigs and sheep, resulting in far more animal deaths
than necessary, as Musk pressured staff to receive FDA approval.
    The Department of Transportation is separately probing
whether Neuralink illegally transported dangerous pathogens on
chips removed from monkey brains without proper containment
measures.
    Neither Musk nor Neuralink have responded to multiple
requests for comment on the probes or the Reuters reports.

 (Reporting by Rachael Levy and Marissa Taylor in Washington,
D.C. and Krystal Hu in New York
Editing by Greg Roumeliotis and David Gregorio)
 ((Greg.Roumeliotis@thomsonreuters.com; +1 646 223 6022; Reuters
Messaging: greg.roumeliotis.thomsonreuters.com@reuters.net))