Short selling

1817 has brought a new feature to the 18xx repertoire: short selling. (Actually, 1817 has several other new features too, but this is the most radical). The idea is that a player can sell a share in a company that he doesn't own. This puts the sold share in the open market and gives the player the corresponding cash from the bank. It also gives him a "short share", which he will have to redeem some time later.

A short share is an opposite of a share - a sort of anti-matter share or a negative share. If the company pays dividends, a player who owns a short share must pay that dividend to the company, instead of receiving it. If he is unfortunate to own the short share at the end of the game, it has negative value equal to the company's current value. At any point, the holder may buy back the short share, provided there is a matching ordinary share in the open market. At that point, the player pays the current cost of an ordinary share to the bank and both shares are removed from the game.

Short selling pays when a company is losing value. When you sell short, you receive the current value of the company. If the company loses value, you then buy back the ordinary share at a lower value, thus making a profit. If the company pays and dividend or increases in value, you make a loss. If there isn't a share in the open market to close the short share, you end up in more trouble.

In 1817, the effect of short selling a company is quite marked. It will drop one space on the stock market for each unsold ordinary share in the open market at the end of the stock round. So the company often takes loans in order to buy up the newly generated shares. Taking loans also depresses the price once per loan, but this tactic allows the company to pay dividends, receive some of the income itself, pay off the loans and regain some of the share price. This is a more complicated financial model than Britain Under Steam.

It might be possible to adopt a simpler version of this mechanism in Britain Under Steam (as an optional rule). A player could short sell a company in the same way, but the effect on the company would be much less. Its price wouldn't drop one space per unsold share, nor would the company be able to buy the shares. Other players might buy the new shares - even the Director could, if there is no limit on ownership when buying from the open market. So the timing of short selling would have to be well-judged.

An even simpler system would be to sell short imaginary shares, just receiving the short share in return. This would run the risk of having to pay dividends or of losing out if the share price increased, but would always be possible to sell.

It could be fun to try, anyway.