CEL-SCI CORPORATION Releases Letter to Shareholders

Dear Fellow Shareholders,

I am writing to you in response to the many phone calls and e-mails that we received within the last 24 hours. You were universally enthused by the licensing deal for our Phase III cancer drug Multikine with one of the most successful and respected pharmaceutical companies in the world. You were excited that they are putting their reputation on the line by actually running and funding the costs of a part of our Phase III clinical trial. You were enthused with the initial increase in the share price, yet no one could understand why our shares, after trading 30 times the normal volume, took such a steep fall in the afternoon. You asked, "How is it possible that the stock can be down after such a good announcement?" As the Company's largest shareholder, and somebody who has purchased shares in the open market regularly, I am as puzzled and disappointed as you.

While we may never know what happened, I have been told by many that the stock traded as if it could have been under an attack from short sellers. Short sellers play a role in the stock market, correcting imbalances in supply and demand that occur periodically. However, it appears that trading in our shares may have involved more than opportunistic short sellers, but may actually have involved manipulation, which is illegal.

Short sellers make money by betting that a stock will decline in price. They sell shares they do not own (yes that is legal as long as you follow certain rules which we think were not followed in this case) and hope to repurchase them at a lower price. Short sellers may look for companies that have been doing better than the averages and/or their peers on the theory that everyone should be knocked down equally. Our share price has been doing much better than the averages and/or our peers in what has been a very challenging market for micro-cap stocks.

We believe that in all likelihood the short seller has been shorting CEL-SCI stock for a while. The selling of our stock increased in the last month, but more importantly, the seller was not acting like a shareholder, but like someone who trades deceptively to create the impression of a decreasing share price. Remember, the short seller makes money from a declining share price. For example, one day we traded about 85,000 shares throughout the day and in the last minute another 80,000 shares were sold. That may have been done to drive the share price down and is euphemistically known as "painting the tape," an illegal activity which makes the stock look weak and unattractive.

Yesterday's announcement of the licensing deal brought in a large amount of buying to our stock and initially increased the share price substantially on huge volume. Having been taken by surprise by this great news, the short seller may have been faced with taking a large loss (having to buy back at higher prices the shares that he sold earlier) or selling again a very large number of shares in order to drive down the share price and stop the share's upward momentum. It appears that he may have opted for shorting many more shares. And again, in the last few minutes of the day's trading, large amounts of stock were sold depressing our share price.

The goal of the short seller may have been to scare investors out of their stock at lower prices so that the short seller can cover (buy the shares back) at a profit (a lower price). So what can you do about this? Short sellers can benefit from creating panic among the shareholders and getting them to sell their shares cheaply. Therefore CEL-SCI shareholders should be aware of the game that is being played with their Company's shares and not be intimidated.

We accept that short selling is a legal activity, but only when conducted according to the rules. WE BELIEVE THAT SHORT SELLERS IN OUR CASE MAY NOT HAVE FOLLOWED THE RULES AND THAT IS WHY WE NEED YOUR HELP. WE NEED YOU TO CONTACT YOUR CONGRESSPERSON AND/OR SENATOR AS EXPLAINED AT THE END OF THE LETTER.

Short selling CEL-SCI stock is allowed ONLY if you can borrow an equivalent amount of CEL-SCI stock. We have checked with brokers and it is very difficult to borrow CEL-SCI shares. Therefore, it is highly unlikely that the massive short sales that have hurt the CEL-SCI share price are legal short sales which have been transacted with a corresponding number of shares borrowed. Most likely these sales were conducted in violation of the short sale rules. These sales were most likely conducted to keep the share price from gaining upward momentum since an increase in the share price would hurt the short seller. If we are correct, we are the victim of vicious and illegal manipulation.

The only way to prove this malfeasance, or disprove it, is to get the regulators to subpoena the trading records of the last few weeks. Only they can find out whether short sellers may have followed the rules. That is where you can be of great help. Twice in the last month we have contacted the SEC and other regulatory bodies and have asked them to investigate. Now we are asking you to contact your local Congressman and/or Senator and request their help in getting the regulators to focus on our issue. Short sellers must abide by the rules. CEL-SCI was created to help people. Now CEL-SCI needs your help.

In attacking CEL-SCI, they are attacking not just your money but also the hope of cancer patients. This affects almost every family. Our Multikine is a late stage cancer drug that appears to be non-toxic and showed significant increases in survival in the Phase II studies. Hence, by jeopardizing the Company, short sellers may be destroying the dreams of many people seeking a novel and non-toxic cancer treatment. I have dedicated 20 years to the development of this drug. We are about to enter the end stage and we are starting to find acceptance even among the big pharmaceutical companies, and I am not going to let these people push us around. I and the management and scientific team at CEL-SCI remain steadfast in our commitment to bring this promising drug to market.

    Thank you for your help,

    Geert Kersten
    Chief Executive Officer

SOURCE CEL-SCI CORPORATION

Copyright © 2009, PRNewswire
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Copyright © 2009, NewsBlaze, Daily News

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