“Blue Horse Shoe loves Anacott Steel.”

It’s a line from the movie Wall Street that every young banker from the 1990s knew. Heck, I had the famous “greed” speech memorized by the time I walked into banking. Although Michael Douglas and Oliver Stone attempted to create a moral fable about the evils of the financial markets, they made Gordon Gekko, his wealth, and his women too attractive for impressionable male minds to resist.

And it’s a good thing, too! Knowing women prefer six-figure salaries to six-pack abs is invaluable information. As my good friend J likes to say, “Cash is the best cologne.”

In the famous scene where Gordon Gekko takes Bud Fox’s tip and starts to buy call options and shares of Anacott Steel, Gekko instructs Fox to call the fictitious Wall Street Chronicle, extension 1605, and tell them, “Blue Horseshoe loves Anacott Steel.”

Gekko was getting into the stock first, a practice known as “frontrunning,” and then getting everyone else in after to push up the stock price. It’s a classic play that’s now illegal, as well as unethical and immoral. (This is why I don’t get into my trades until after I tell you what I’m going to do.)

There’s another way firms go when they don’t like stocks. They can short-sell them.

Long and Wrong

Remember how everyone tells you to "buy low and sell high?” If you remember nothing else about what I’m about to say to you, just remember that short selling is “selling high, then buying low.” You’re just inverting a classic strategy. How can you sell something you don’t own? I’ll get to that in a second.

However, before I proceed, please note that short selling is a valid and legal strategy that financial markets need to maintain, or return to, correct pricing. The price mechanism depends on it. Short selling also increases market liquidity. After all, if someone is selling, then someone else has to buy. And if those don’t work for you, sheer speculation is another reason for short selling.

Most investors hate it because they’re long stock. And if a short seller is correct, that investor would be “long and wrong.”

What are the mechanics of short selling? Well, if you bought a share and then sold it, you’d be net zero shares. So that doesn’t help you. That means you need to borrow the shares first. Here are the steps:

1. Borrow Shares: The investor borrows shares of the stock they want to short. Their broker locates and lends these shares, often from another client’s holdings (such as a pension fund, as they own tons of shares and aren’t allowed to short stock by law). The pension fund retains beneficial ownership, meaning it still receives dividends, even if they’re manufactured as cash payments from the shorter of the stock, and can recall the shares on demand (usually) to participate in votes at company meetings.

2. Sell the Borrowed Shares: The investor sells the borrowed shares in the open market at the current market price.

3. Wait for Price Movement: The investor expects the stock’s price to fall. During this period, the short seller must pay interest on the borrowed shares (to the broker) and meet the margin requirements.

4. Buy Back: If the price drops, the investor buys back the shares at the lower price. This is also known as “covering the short.”

5. Return Shares and Profit/Loss: The bought-back shares are returned to the broker. The investor’s profit is the difference between the higher sale price and the lower repurchase price, minus any fees and dividends (to the pension fund), and interest (to the broker). If the price had risen (a short squeeze), the short seller would pay the difference, resulting in a loss (with theoretically unlimited risk).

Some firms make short selling their raison d’être.

Activist Short Sellers

You may have heard of Muddy Waters, a firm founded by Carson Block in 2010. It’s probably the most famous short-selling firm in the world. 

Blue Orca, founded in 2018 by Soren Aandahl (formerly of Glaucus Research), is the newer, flashier player—characterized by sharp language, splashy reports, and a focus on emerging markets and special situations.

Blue Orca Capital and Muddy Waters Capital are two of the biggest names in activist short selling, but they come at the game from different angles.

Blue Orca has targeted companies such as Samsonite, Pinduoduo, and, yesterday, Aya Gold & Silver. 

Muddy Waters is the old hand. Carson Block built the firm on the back of in-depth exposés that famously unraveled Chinese accounting frauds, such as Sino-Forest. Since then, they’ve gone after bigger game—Luckin Coffee, AppLovin, Eurofins, FTAI—with meticulously researched reports that still move markets.

Blue Orca thrives on immediacy and headlines; Muddy Waters has the pedigree, the scars, and the global track record. Together, they keep corporate executives sweating and investors guessing.

Blue Orca Hates Aya Gold & Silver

Sometimes, you just gotta get lucky.

Yesterday, I thanked Mother Mary after taking a hunch last week and selling Aya Gold and Silver (AYA.TO). I’d love to tell you I had some kind of clairvoyance, but really, it was just as I said. I like Aya, but I wanted to own junior miners with higher return potential. I was going to swing for the fences. That’s all.

That’s because Blue Orca Capital came out swinging at Aya Gold & Silver (AYA.TO), publicly disclosing it is short the stock after publishing a scathing report that accuses the company of inflating its resources.

This is merely the disclaimer on the Blue Orca report:

THIS RESEARCH REPORT EXPRESSES SOLELY OUR OPINIONS. We are short sellers.We are biased. So are long investors. So is Aya. So are the banks that raised money for the Company. If you are invested (either long or short) in Aya, so are you. Just because we are biased does not mean that we are wrong.

While Blue Orca confirmed the short, it never disclosed the size of the bet—no share count, no dollar figure, and no mention in filings or public statements.

What we do know is the broader market picture. As of mid-September, Aya had roughly 5.07 million shares sold short—about 3.5–4% of the float—with 4.75 days to cover.

For reference, days to cover below two is considered low, indicating high liquidity and minimal risk of a short squeeze, between 3 to 7 is moderate, showing some crowding and potential volatility but not significant squeeze risk, and above eight is high, suggesting potential difficulty for shorts to exit and heightened squeeze potential.

In other words, while Blue Orca’s precise position remains a mystery, the days to cover show a roughly average crowd betting against Aya.

The opening sentence in the report will suffice for this column:

We are short Aya Gold & Silver (TSX: AYA) (“Aya” or the “Company”) because we believe there is overwhelming evidence that Aya inflated its silver resource at Zgounder, its only producing asset, by over 100%, potentially reflecting as many as 50+ million phantom ounces. In our opinion, this explains why grades are plummeting, production has been dire, and cash flows are anemic despite soaring silver prices.

They published on X at approximately 9:45 a.m. ET in the United States.

As a result, AYA was down 15.49% yesterday.

In case you were wondering, while frontrunning leverages privileged, non-public information for unfair gain and is illegal, short selling and then disclosing the position isn’t.

Short selling, accompanied by subsequent critical reporting, isn’t unlawful as long as the information and analysis are genuine, publicly available, and not intended to manipulate the market through deceit.

With all that said, Aya wasn’t taking this lying down.

Aya Strikes Back

Aya CEO Benoit LaSalle was quoted as saying:

The allegations made against Aya are categorically false. Zgounder’s mined ounces reconcile as expected, our mining methods and operating practices continue to improve, and we are finalizing an updated technical report that will integrate both open-pit and underground operations. Recent drilling continues to confirm extensions at Zgounder, while Boumadine is advancing rapidly as a tier-one growth asset. Backed by strong cash flow, rigorous governance, transparency, shareholder alignment, and independent third-party verification, Aya is firmly focused on disciplined execution and long-term value creation.

Aya also said in its press release:

The report contains numerous inaccuracies and mischaracterizations, including about Aya’s current management team, operations, and resource base, which the Corporation believes are intentionally misleading and are intended to benefit the short seller, which has itself disclosed that it stands to profit in the event that the Corporation’s share price declines, at the expense of Aya shareholders.

Don Durrett, ace mining analyst, posted on X:

Aya is a Mormon, so many of you are likely married to it.

Is Zgounder flawed? Does Aya deserve a divorce? Absolutely not. Zgounder is growing in size. The resource is not a problem. Buy the dip. 

The bottom line is this: we don't own Aya for Zgounder. We own it for Boumadine, which is massive. We don't own Aya for 2025 or 2026. We own it for 2027 and 2028, when Boumadine begins to get valued into their share price. 😉

Wrap Up

What a day yesterday was. Aya got trounced on the back of a short seller’s trade and subsequent report. All of it was completely legal. Now it’s up to the market to decide whether to hold onto it or sell it.

Luckily, we escaped a close one. But it was indeed sheer luck. Let’s be thankful for it and move forward. Spot silver is trading above $45 as I write, with spot gold up to $3,754. Hopefully, we’ll have another profitable day today.

Have a wonderful weekend!