Key Insights

• Verrica Pharmaceuticals' significant insider ownership suggests inherent interests in company's expansion
• The top 2 shareholders own 53% of the company
• Institutions own 17% of Verrica Pharmaceuticals

If you want to know who really controls Verrica Pharmaceuticals Inc. (NASDAQ:VRCA), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are individual insiders with 38% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders scored the highest last week as the company hit US$406m market cap following a 25% gain in the stock.

Let's take a closer look to see what the different types of shareholders can tell us about Verrica Pharmaceuticals.

What Does The Institutional Ownership Tell Us About Verrica Pharmaceuticals?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Verrica Pharmaceuticals does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Verrica Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.

Our data indicates that hedge funds own 9.4% of Verrica Pharmaceuticals. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. 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.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

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. 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.

It seems insiders own a significant proportion of Verrica Pharmaceuticals Inc.. Insiders own US$156m worth of shares in the US$406m company. 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, who are usually individual investors, hold a 19% stake in Verrica Pharmaceuticals. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

Private equity firms hold a 17% stake in Verrica Pharmaceuticals. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

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 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.