iTurf may fly next week, but DLIA won't necessarily move with it.
I agree with the "not necessarily" part, but there is good reason for it to move (sorry, I'm new to the board and don't know whether this reasoning has already been offered):
Delia's market cap is about $445MM. The iTurf IPO, at the latest offering price, will give iTurf an instant market cap of $180MM. Delia is selling only 20% of iTurf. Therefore, all iTurf has to do is close at its IPO price to give DLIA additional assets worth another 32 percent of its current market cap the day of the IPO ($31.50 -> $41.50). If iTurf's price doubles -- not unreasonable in light of iVillage -- then DLIA's price should, in economically rational terms, go to $51.88.
Is this guaranteed to happen? No.
Do stock prices always track the value of a company's assets? No.
Is my reasoning already incorporated into DLIA's price? Maybe.
So it won't necessarily move with iTurf's price, but it would certainly make sense if it did, and I, personally, am expecting it to do just that. |
