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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 neighbourhood
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 85percent of pre-IPO companies are currently
valued in secondary trades at an average discount of 47 percent 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
and Alphabet Inc's 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 percent 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. © Reuters