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A Soaring Stock Hasn't Scared the Shorts Away From Diamond Technology

Also, an update on the Hambrecht & Quist funds.

Mun-Dayne:

Cutting diamonds:

Reader

Van Christenson

recalls that one of my sources thought

Diamond Technology Partners

(DTPI)

, a consulting firm, "was a good short back in May. The price was considerably lower (24 vs. 41). Has he changed his mind, or are we now looking at a really winning short?"

The latter, according to the short-seller, who claims to have been adding to his short position at current levels. Diamond is considered a high-quality information-technology consulting firm, with a special focus on e-commerce. Back when it was first mentioned

here, on June 1, the key concern of short-sellers was high receivables. After all, this was a company that had gone on record saying it wouldn't accept clients who don't pay on time. At the time, the short-seller believed the rise in receivables was the result of a fundamental deterioration in Diamond's base biz and that it was pulling revs from future quarters.

Diamond President Mike Mikolajczyk shrugged off the rise in receivables to payments from two customers that arrived a week after the quarter closed. He blamed "bureaucracies" at those companies.

Well, apparently this bureaucracy problem with its customers is getting way out of hand. Last quarter receivables shot up 122% on a revenue gain of only 40%. (It's not generally good to see receivables rise more than revenue; it suggests a company is pulling out all stops to make their numbers look better than they really are.)

What's more, last quarter Diamond's cash flow from operations went negative to the tune of $4.5 million.

Finally, last week

USWeb/CKS

(USWB)

TheStreet Recommends

completed its purchase of

Mitchell Madison Group

, a Diamond rival, for $300 million. Based on Mitchell's 550 consultants, that breaks down to $550,000 per consultant. As of July 29, Diamond had 296 consultants. Put another way: If it was acquired at the same multiple per consultant, it would sell for $163 million or $10 to $12 per share. Friday, Diamond closed at 42 1/8.

Diamond officials didn't get back to me, but if they do, I'll give them the same fair-and-equal treatment as I give anybody else who responds.

Speaking of which:

Last week a column

here, with a

response from

SFX's

(SFX)

Robert Sillerman, generated quite a few responses from readers who liked seeing Sillerman's letter. It gave them a chance to compare both sides of the story (though we haven't even gotten into a full-scale battle, based on what the short-sellers are saying about the company's balance sheet -- including a slide in cash from operations -- and the nuances of the entertainment biz; it's their words vs. his execution).

Some wondered if there'd be a follow-up or whether it changed my opinion on the company. To which I say: No change here (the red flags are still flying) and there will only be a follow-up when events warrant.

I thought Sillerman's response showed how firmly in control he is of his company; can't imagine his attorneys wanted him to write it. Attorneys, leery of litigation, never want

any

CEO to respond.

And Bob (may I call you Bob?), from several readers: If it wasn't you, whoever wrote the letter deserves a raise; it was really excellent.

And one question from me: What does FX stand for?

Amazon antics:

I'm hearing from

everybody

about the $10-off coupons they're receiving in their emails from

Amazon

(AMZN) - Get Amazon.com, Inc. Report

. The only catch: They must use them by Sept. 23. Amazon's quarter, of course, ends Sept. 30.

Hmmm.

(What I wanna know is why I didn't get one; I'm a customer in good standing!)

Closed-end, update:

Back in February, David Tepper of

Tepper Capital Management

in San Francisco, one of this column's longtime closed-end fund sources,

recommended the

H&Q Healthcare Investors

(HQH) - Get Tekla Healthcare Investors Report

and

H&Q Life Sciences Investors

(HQL) - Get Tekla Life Sciences Investors Report

funds. Since then, H&Q Healthcare is up around 12.8% and H&Q Life Sciences has gained 18.8%. "Both funds have positions in

Gilead Sciences

(GILD) - Get Gilead Sciences, Inc. Report

, which has helped," Tepper says.

Yet they both still trade at steep discounts to their net asset values, and "we have seen a fair amount of merger and acquisition activity in the biotech/medical tech area that probably will continue," which is why he remains bullish on both.

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column