Neuralink, the brain implant startup founded by Elon Musk, has seen a significant increase in its valuation despite facing numerous obstacles on its path to market. According to sources familiar with the matter, privately executed stock trades have pushed Neuralink’s value to approximately $5 billion. This valuation surge was primarily driven by bullish investors who made purchases in the months leading up to Neuralink’s recent announcement that it had received regulatory approval for a human trial of its brain chip.

While the approval of the clinical trial is undoubtedly a positive development for Neuralink, experts caution that the company still has a long way to go before securing commercial use clearance. Kip Ludwig, a former program director for neural engineering at the U.S. National Institutes of Health (NIH), optimistically estimates that it may take at least another decade for Neuralink to commercialize its brain implant. Additionally, the company faces federal probes into its handling of animal research, adding further challenges to its journey.

Despite these hurdles, the approval of the trial has fueled investor interest, resulting in the recent private marketing of Neuralink shares at a $7 billion valuation, or $55 per share. It remains unclear whether these shares were successfully sold at that price. The email cited the U.S. Food and Drug Administration’s (FDA) approval of the clinical trial as a significant factor in making the deal more appealing.

Elon Musk has long expressed ambitious goals for Neuralink, envisioning a future where its chips enable both healthy and disabled individuals to receive quick and efficient surgical implantations to treat various conditions such as obesity, autism, depression, and schizophrenia. He even foresees the potential for using these implants for activities like web surfing and telepathy. However, a Neuralink executive recently outlined more modest short-term objectives, including assisting paralyzed patients in communicating through computerized text without the need for typing.

It’s important to note that the recent stock transactions resulting in a $5 billion valuation have primarily involved existing shareholders, including employees and early backers of the company. These secondary trades, while providing some insight into Neuralink’s value, do not carry the same weight or market consensus as fundraising rounds or initial public offerings (IPOs). Typically, about 85% of pre-IPO companies are valued at a significant discount of 47% in secondary trades compared to their last funding round, according to data provider Caplight.

Neuralink’s valuation surge in secondary trades stands in stark contrast to trends observed among other startups. The fact that small investors, who are often more focused on owning a piece of a company associated with Musk rather than critically evaluating its valuation, have participated in many of the recent stock sales may explain this deviation. Notably, the maximum sought amount for Neuralink shares marketed at a $7 billion valuation was a mere $500,000, according to the Reuters report.

Despite the enthusiasm from some investors, skepticism remains among biomedical experts. Arun Sridhar, a scientist and entrepreneur specializing in neuromodulation, deems Neuralink’s valuation “bonkers” given the early stage of clinical development for its brain implant. Sridhar, involved in launching Galvani Bioelectronics, a developer of implants focused on treating rheumatoid arthritis, argues that a study assessing safety and tolerability alone does not justify a $5 billion valuation. It’s worth noting that Galvani is not a direct competitor to Neuralink, as their implants are designed for installation in an artery to the spleen rather than the brain.

As Neuralink continues to navigate the complex landscape of neurotechnology and regulatory approval processes, the company’s valuation will undoubtedly be subject to scrutiny and further fluctuations.