Key Insights

• Insiders appear to have a vested interest in Verrica Pharmaceuticals' growth, as seen by their sizeable ownership
• The top 2 shareholders own 53% of the company
• Insiders have sold recently

To get a sense of who is truly in control of Verrica Pharmaceuticals Inc. (NASDAQ:VRCA), it is important to understand the ownership structure of the business. With 38% stake, individual insiders possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Despite recent sales, insiders own the most shares in the company. As market cap fell to US$224m last week, they would have faced the highest losses than any other shareholder groups of the company.

Let's delve deeper into each type of owner of Verrica Pharmaceuticals, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Verrica Pharmaceuticals?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Verrica Pharmaceuticals. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Verrica Pharmaceuticals' historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 9.4% of Verrica Pharmaceuticals. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Paul Manning is currently the company's largest shareholder with 36% of shares outstanding. In comparison, the second and third largest shareholders hold about 17% and 9.4% of the stock.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 53% stake.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Verrica Pharmaceuticals

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems insiders own a significant proportion of Verrica Pharmaceuticals Inc.. It has a market capitalization of just US$224m, and insiders have US$85m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 18% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 17% stake in Verrica Pharmaceuticals. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Verrica Pharmaceuticals better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Verrica Pharmaceuticals (of which 1 is significant!) you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.