Editor's Note: Herb Greenberg's column runs exclusively on RealMoney.com; this is a special free look at his column. For a free trial subscription to RealMoney.com, click here. This article was published Feb. 20 on RealMoney.

Wednesday wallop:

  • Alloy's shares get wheeled out: Alloy's ( ALOY) secondary offering of 5 million shares is expected to be priced Wednesday night, and by all indications the Generation Y marketing company's deal is fully subscribed. What do investors see that makes them willing to pay nearly 3.8 times trailing sales -- more than 4.5 times after the stock offering -- for a company that's little more than a rollup of low-margin businesses? And these businesses trade at low multiples because they either don't grow quickly or don't generate strong returns.

    What's more, Alloy is being billed as an Internet stock of sorts. The company is expected to be followed by Internet analyst Holly Becker of Lehman Brothers, whose firm is the deal's lead underwriter.

    Yet how much of the company's sales come from the Internet? When that very question was asked last week in New York, during the company's road show to sell the deal -- according to one hedge fund manager who was there -- Alloy's CFO said it was impossible to provide a specific answer, given how interrelated the company's online and offline businesses were.

    "His response to the question gave us the impression that less than 20% of the company's revenues could be directly linked to the Internet," says the hedge fund manager, who is short the stock. The CFO has not returned my call, which included specific questions left on his voice mail late Tuesday.

    That number is important, the hedge fund manager says, because Alloy has yet to earn a dime. The only reason it would command a high multiple is that it has higher margins and a higher growth rate than a comparable offline company. "This company has a negative net margin," he says. On a basis of earnings before interest, taxes, depreciation, interest and amortization (EBITDA), the margin is marginally positive.

    That's not all: While the company and its fans brag that Alloy has beaten expectations for 12 straight quarters, it's unclear how much of that beat comes by way of acquisitions and how much was generated internally. That's an important question, because the trouble with rollups is that they generally stop growing when they stop making acquisitions. Alloy, for its part, tends to pay 10 times to 12 times trailing EBITDA for companies. Yet it's trading for much more than that, according to its expected EBITDA -- assuming you even care about EBITDA.

    Remember, this is a company that doesn't have real earnings, and companies that don't have real earnings are often measured on a multiple of sales. Our hedge fund source thinks a company such as Alloy, whose products include magazines and catalogs, isn't worth much more than a typical catalog retailer -- with a slight discount for being a rollup. Lands' End ( LE), a catalog company with a history, trades for less than 1 times sales.

    Based on that metric, and generously giving Alloy the full multiple, Alloy should be worth around $143 million, or $4.33 per share. Adjusted for the offering, it should be more like $3.76. Either way, that's a far cry from its current price of about $16.

  • River runs deep: Irish educational software maker Riverdeep ( RVDP) had been telling analysts that it expected to file its quarterly 6-K with the Securities and Exchange Commission by Feb. 15. In fact, on Jan. 31 a team of analysts at Credit Suisse First Boston, the company's lead cheerleader, made a special point of mentioning in a report that Riverdeep's filings would be "in accordance with U.S. time frames," which would mean its quarterly filing should have been out by last Friday.

    What's the new due date? A spokesman would only say "sometime this week." Why will it be late? He didn't say.

    Will it be filed on the SEC's Edgar site? No, he said, it'll be put up on Riverdeep's Web site after it's filed in the SEC's public reference room. When will that be? He had no idea.

    So much for a speedy dissemination of information.
    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 and invites you to send any to Herb Greenberg. Greenberg also writes a monthly column for Fortune.

    Brian Harris and Mark Martinez assisted with the reporting of this column.

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