Short Selling Scare

PurchasePro releases letter to shareholders, expresses concern for "short selling" in the marketplace

LAS VEGAS -- Oct. 11, 2001  Due to recent stresses on its stock price, PurchasePro today released the following open letter to its shareholders:

Dear PurchasePro Stockholder:

Let me begin by thanking you for your continued support of PurchasePro. As a result of the many questions we've received from our shareholders, regarding the "short" position in PurchasePro's stock, I believe it is appropriate to publicly discuss the issue.

Management believes that the current stock price is attributable, in part, to heavy pressure from "short selling" in the market. First, let me explain what "short selling" is and what we think you can do to help us, and in turn, help yourself.

In "short selling," traders sell stock they do not own by borrowing shares from a broker. If the stock price goes down, the short sellers buy stock in the market at a lower price, return the stock to the broker and systematically make a profit. By selling first and buying later, short sellers benefit from stock prices going down instead of up. Thus, their interest in our company conflicts with what most of our stockholders want, the stock price to increase.

Traders borrow stock from people like you, whether you know it or not. If your shares are registered in your broker's name instead of yours or if they are held in a margin account, your broker may lend your PurchasePro shares to "short sellers."

While many companies experience short selling in the marketplace, the amount of short selling compared to the trading volume in our stock has been unusually high. This may be contributing to the downward pressure on the price of our stock.

Therefore, we are asking all of our shareholders to do the following: Promptly call your brokers and have your PurchasePro stock taken out of street name or place your holdings into a cash account. This means that instead of your shares being registered in your broker's name or being held in a margin account, they would be registered in your name or placed in a cash account. You would still own the stock, and your ability to hold or sell the stock would not change.

By registering your shares in your name or holding them in a cash account, a short seller would not be able to borrow your stock without your permission. The only difference would be administrative, including possible paperwork and possible minor expenses you may incur in re-registering or moving your shares. This element differs from brokerage firm to brokerage firm. When you want to sell, you would have to send your broker instructions to move the stock back into street name or into a margin account, and the broker may ask you to sign some transfer documents.

We think this is a small price to pay for relieving the heavy short selling pressure on our stock. You can seek to take shares out of street name or a margin account at any time, accordingly, we are asking stockholders to call their brokers promptly and attend to this issue. PurchasePro intends to work with its transfer agent and participating brokers to make the process of re-registering your shares or moving them into cash accounts as quick and easy as possible. If you have any questions about this process, please call Steve Stern, PurchasePro's vice president, corporate communications and investor relations, and he'll be happy to assist you.

PurchasePro has undertaken a number of recent steps to better its position for the future. We have a strong strategy and clear tactics to support this strategy. As a shareholder, you can help. We appreciate your consideration of this important matter and thank you for your continuing support of PurchasePro.


Richard Clemmer, President and CEO