If variable is declared As Short? then the code works with a slight tweak: you need to cast either operand of If to the target type first:
variable = If(condition, CType(Nothing, Short?), CShort(…))
(You could also have cast the third operand instead, or both.)
This cast is necessary because of how If deduces types: if the two result types mismatch, a common type is deduced which is the closest parent type, i.e. a type from which both inherit. However, with Nothing, new rules come into play because as far as VB is concerned, Nothing is already a valid Short – a default-initialised one (see old answer below for explanation). So VB doesn’t try any type coercion, it simply uses Short as the return value.
Old answer below, assuming that OP had declared variable As Short:
You cannot set value types to Nothing. If you assign Nothing to a value type then it will be set to its type’s default value instead – which is 0 for Short.
You can test this easily:
Dim s as Short = Nothing
Console.WriteLine(s)
Setting a value type to Nothing is the same as invoking its default constructor (New Short()) or declaring a new variable of that type without initialising it. The corresponding operation in C# would be to assign default(T) (short s = default(short)).
If you want to represent null value types, you have to use nullable types:
Dim s as Short? = Nothing
Now s is of type Nullable<Short> (Short? is a shortcut of that) and can be assigned a proper Nothing.