Can't help but wonder what

Delia's

(DLIA)

, known best as a teenage catalog retailer, is trying to DO with the spinoff of its online unit,

iTurf

, via an IPO. It's one of those deals that has controversy written all over it.

Forget that it has five underwriters. (Any more than three can be a warning that the company is pulling out all stops to get the stock sold and secure positive analyst coverage.) And never mind that the CEO of iTurf will be the same guy who runs Delia's. (Doesn't he have his hands full with Delia's?)

The real question is whether the deal is little more than an elaborate ploy to help funnel cash into Delia's, which by all accounts is bleeding cash and may be having trouble justifying a stock that trades 2.5 times sales (and 81 times trailing earnings) when the typical catalog retailer trades at 1 times sales, according to a source who tracks this industry.

Investors seem to be forgetting that Delia's is the same company that last year tried to allay concerns about a slowdown, based on changes in the wording of the second-quarter 10-Q. Shortly thereafter, in September, the company preannounced a lousy quarter. And for the nine months ending October, the earnings rose only a penny from the same period a year earlier. Analysts responded by downgrading the stock to a hold.

But then, to Delia's good fortune, the Internet heated up. And it just so happens that a year earlier the company had acquired a little Internet site in exchange for a small slab of its stock. The company started aggressively promoting its Internet operations, and in December it announced an e-commerce deal with

Yahoo!

(YHOO)

.

So what if everybody has a deal with Yahoo!? The timing couldn't have been better. Delia's stock, which had sunk as low as 6 in September, was back at 20 by February; it closed yesterday at 27 7/8.

The company appears to have kept the interest high by guiding analysts to believe Internet sales would be robust in the fiscal year that ended in January. (At least that's the impression based on the $6 million that at least one analyst had been projecting.) It was a sizzling enough story for the company to convince investment bankers that now was the time to unlock the Internet value through a public offering of 30% of the iTurf stock.

As it turns out, according to iTurf's audited results, iTurf did $4 million last year -- not $6 million. The key word is "audited," because if iTurf's audited results are out, why aren't Delia's? If one's done, the other should be done. And Delia's are usually out by the middle of March. Usually delays are

not

good.

Which brings us to the reason for today's sermon: According to the prospectus, iTurf plans to use as much as $13 million of the $42 million it hopes to raise to buy stock in Delia's directly from the company. (Yes, you read that right: Delia's is getting cash out of this too. Delia's is spinning off a company that will use part of the proceeds to buy stock in Delia's from Delia's.)

This, when Delia's cash position fell to $3 million at the end of October from $32 million at the end of January 1998. And after the deal, iTurf will be 70% owned by Delia's, which will include iTurf's results as part of its own. If iTurf investors are indirectly buying into Delia's, shouldn't they have a right to see the financial health of what they're buying? You would think.

Delia's officials declined comment, citing the IPO quiet period.

P.S.: iTurf's web site (

www.iTurf.com) pops up nicely but all it does at this point is provide links to other sites, including www.Delias.com, Delia's existing Web site.

Short Positions

What-goes-around-comes-around department: Money manager Jeff Vinik, who has a history of buying into stocks that have been heavily shorted, at year-end was the largest investor in HMT Technology and CHS Electronics , both of which have imploded. (Can't wait to see, in the next round of filings, if he got out in time.) Thanks to JJC: For the kind tip-o-the-hat in one of yesterday's daily dispatches. This column's bearish sources may sometimes be way too early, but in the end they're usually frightfully right.

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

herb@thestreet.com. Greenberg writes a monthly column for Fortune and provides daily commentary for CNBC.