A look at the shareholders of Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) can tell us which group is most powerful. With 38% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
As market cap fell to US$299m last week, insiders would have faced the highest losses than any other shareholder groups of the company.
In the chart below, we zoom in on the different ownership groups of Verrica Pharmaceuticals.
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.
We can see that Verrica Pharmaceuticals does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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.
NasdaqGM:VRCA Earnings and Revenue Growth June 27th 2024
It would appear that 9.4% of Verrica Pharmaceuticals shares are controlled by hedge funds. 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. Looking at our data, we can see that the largest shareholder is Paul Manning with 36% of shares outstanding. In comparison, the second and third largest shareholders hold about 17% and 9.4% of the stock.
To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Verrica Pharmaceuticals
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our information suggests that insiders maintain a significant holding in Verrica Pharmaceuticals Inc.. Insiders have a US$115m stake in this US$299m business. 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. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Verrica Pharmaceuticals has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this freereport on analyst forecasts.
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.
