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RealTime IT News

DELiA*s Regains Home Turf

Straight out of an episode of VH1's Where Are They Now, investors are still wondering the same thing about last year's high-flying who's-who of e-tailing. One flavor of the month that particularly caught exuberant investors' attention was the Gen-Y hyperbole. And whatever did happen to those pimple-popping chic fashion retailers anyhow? Like any wretched case of acne, they eventually went away and ended up just another phase that pre-pubescent retail investors outgrew.

One of the more peculiar wedding invites in the M&A patch came across my desk yesterday when teeny-bopper apparel Web site dELiA*s unveiled plans to do the two-step with iTurf in an $86 million merger deal. If you're wondering why both companies have the same chairman and CEO, both hail from Silicon Alley, and both target the same demographic, it's because dELiA*s saddled the investing public with its iTurf online subsidiary back in April of last year. The parent once had ambitious plans to unlock its dot-com value from the spin-off and pocket some fast-cash. This must be Plan B.

Looking back at the froth preceding iTurf's timely debut, I think investors would agree that we all had a little too much to drink at the office Christmas party that year. The newcomer first doubled its price range from a reasonable $10-$12 to a brow-raising $22, while bumping its number of shares from 3.7 to 4.2 million. Instead of raising $40 million, the start-up effectively walked away with nearly $100 million in its war chest.

DELiA*s had its grubby hands in the cookie jar too. With a majority interest in the IPO, its own stock suddenly sprouted legs, nearly scoring a double-bagger for short-term speculators in roughly three weeks before deflating like a wet paper bag in the months following. But, that's not the half of it. Late last year, with both parent and sibling taking slow stony grave steps toward penny stock-ville, dELiA*s, and its CEO Steve Kahn, wasted little time milking the cash cow, selling a combined $30 million in iTurf insider stock.

Neither dELiA*s nor iTurf has recovered since, and both look like two peas in a pod at $3 a pop. Even upstart brokerage house Wit Capital discontinued coverage of iTurf two weeks ago after the company's market cap slipped beneath the radar. In hindsight, iTurf's IPO served as a high-limit charge card for dELiA*s, drawing a steady paycheck straight from its subsidiary's IPO windfall until the money finally dried up.

Now that the credit card has maxed out, this move looks like an effort to consolidate costs and combine the books. dELiA*s still loses big bucks on iTurf even today, and bringing the spin-off in-house may cut some fat by decreasing overlap and trimming its necessary workforce. It's readily apparent that dELiA*s execs realize that iTurf won't be laying anymore golden eggs as an out-of-favor, plain vanilla, money-losing niche e-tailer. But, you can bet if there were anymore pocket change between the cushions, we wouldn't be talking about this merger.

Any questions or comments, love letters or hate mail? As always, feel free to forward them to kblack@internet.com.

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