Small caps last week: Papa John's doubts, Perfect goes private, LLY-AtaiBeckley deal

This past week, BofA turned bearish on Papa John’s, while shares of psychedelic-drugmaker AtaiBeckley jumped on reports of takeover talks with Eli Lilly, which ended up materializing. Beauty tech Perfect Corp., meanwhile, announced plans to go private by the end of the year. Here are these and other highlights in the small-cap space for the week of July 13-17.

BofA downgraded to "underperform" shares of pizza chain Papa John's International. Among the reasons for the downgrade the analysts cited the departure of an executive, mounting competitive pressure, and a steeper-than-expected decline in sales. BofA also cut its target price by 19% to $34 per share.

The downgrade came after Ravi Thanawala stepped down as Papa John’s CFO on June 30. BofA believes the management shake-up will make the company’s financial performance harder to predict.

Growing competition in the pizza market also played a role. Papa John’s U.S. comparable sales fell 6.4% year over year in the first quarter, while Domino’s Pizza posted a 0.9% increase over the same period. Most of Wall Street remains neutral on Papa John's: 10 analysts recommend "hold," six "buy," and one "sell."

Pharmaceutical giant Eli Lilly was in talks to acquire AtaiBeckley, a small developer of psychedelic-based treatments for depression, Bloomberg reported. The deal, officially announced shortly thereafter, looks to bolster Eli Lilly’s neuroscience portfolio, an area in which the company made its name with the antidepressant Prozac. AtaiBeckley shares surged 33.4% on Thursday.

AtaiBeckley has three lead psychedelic-drug candidates in development. Two are in mid-stage clinical trials, while the third, BPL-003, has reached phase III testing. BPL-003 is a fast-acting nasal spray for treatment-resistant depression.

Among Wall Street analysts, AtaiBeckley stock has 11 “buy” ratings versus four “hold” calls.

Perfect Corp., a small-cap developer of AI-powered beauty technology solutions whose partners include L’Oréal, agreed to be acquired by ProjectNY, an entity controlled by Perfect Corp. founder Alice Chang. The stock will be delisted after the transaction closes. The announcement sent its shares up more than 10% on the previous Friday.

The deal values Perfect Corp. at $2 per share, about 48% above its March 17 closing price, the last trading day before the company received a preliminary buyout proposal from an investor group led by Chang. Perfect Corp.’s board has approved the merger, which still requires the backing of at least two thirds of shareholders. The parties expect to close the deal in the fourth quarter.

Perfect Corp. is best known for its smartphone apps, including photo-editing app YouCam Perfect and virtual-makeup app YouCam Makeup. Its partners include L’Oréal, Estée Lauder, Sephora, Shiseido, and Avon, which use virtual try-ons to help drive sales.

All three Wall Street analysts covering Perfect Corp. recommend "hold." Their average target price is close to $2 per share, broadly in line with ProjectNY’s offer.

Braiin, an Australian small-cap developer of AI tools for automation and predictive analytics, has launched a new AI agent for the real estate sector. Unlike conventional AI assistants, ARIA can interpret a business objective, coordinate multiple systems, and carry out routine operational tasks, referring only key decisions or exceptions to a human. The launch gives Braiin exposure to the real estate software market, which Grand View Research expects to grow 12.2% annually to reach $32 billion by 2033.

Braiin shares jumped almost 17% on the Nasdaq on Monday, bucking a broader selloff sparked by the escalating conflict in the Middle East and AI jitters. The only Wall Street analyst covering Braiin has a "buy" call on the stock.