When I saw the crop of top insider purchases this week I was initially not very thrilled because it consisted of the usual suspects like Asana (ASAN) and B. Riley (RILY), micro-cap companies and a regional bank.
The B. Riley insider purchase was related to a $115 million secondary offering priced at $55/share by the company. Insiders of the company picked up $7 million of shares in the offering, including a $4 million purchase by CEO Bryant Riley. According to the company, they expect to use the proceeds of the offering for “general corporate purposes, including funding future acquisitions and investments, repaying and/or refinancing indebtedness, making loans and/or providing guaranty or backstop commitments to clients in the ordinary course of business, making capital expenditures and funding working capital”.
In other words, they can use the proceeds for anything or everything. While this move can be seen as positive for the holders of B. Riley’s baby bonds, which we discussed in more detail in the June 2023 Special Situations Newsletter, it did not instill a lot of confidence in holders of the company’s common stock.
The company that however caught my attention was Verrica Pharmaceuticals (VRCA). Verrica is a dermatology focused pharmaceutical company with a market cap of $242 million and an enterprise value of $182 million on account of $60 million in net cash on the balance sheet after excluding capital leases. Chairman of the Board, Paul Manning, purchased $1 million of shares last week at an average price of $5.02 per share. The name was familiar to me because I have seen him purchase shares of Verrica at much higher prices in the past as well as purchase shares of several other companies.
His profile on Verrica’s website provides a quick overview of his experience in the pharmaceutical industry: