One of the oldest games in Wall Street – and financial centers elsewhere – is to peddle a story that a business is in financial trouble. The idea is usually to drive the price of shares down to a point that a profit can be made by buying back the shares at a lower price.

We were reminded of that model this morning as we read a story in The Nightly, an Australian online evening newspapers quoting the $3.4 billion(AUD) Plato Global Alpha Fund saying it thinks Treasury Wines could go bankrupt.

“We have a model to estimate the probability of a company going bankrupt, and this is particularly elevated for Treasury Wines,” warned Plato. “This concern is even more acute with interest rates rising and the macro outlook deteriorating.”

Plato has been actively short-selling TWE's stock, meaning it is selling stock it doesn't own. It can make money if it can buy back the stock at lower prices than it sold. Currently Plato and other investors have shorted about 13% of TWE's currently outstanding shares.

There's a reason Plato is flogging a story about TWE being on the verge of insolvency. On March 26, TWE stock was priced at $3.37 (AUD). As I wrote this issue of Kane's Beverage New Daily at 7:20 a.m., TWE's stock had risen to $3.73 (AUD) – a 19.7% jump in just seven days.

In other words, a short-squeeze could be in the making. What's a short squeeze? That's when short-sellers who have sold stock they don't own have to buy it back at higher prices than the sale price. Since short-sellers typically using high amounts of leverage, this can be a quick path to ruin. As the old Wall Street adage goes, "He who sells what isn't his'n, must buy it back or go to prison." The quote is often attributed to Daniel Drew, a notorious short-seller who used it to describe the consequences of fraudulent stock market practices.

So, what is the status of TWE's balance sheet? It's total equity has grown steadily over the last five years to $4.8 billion (AUD) from $3.59 billion. It's current ratio as of June 30 , 2025, the end if its fiscal year, was 2.02, which means it had $2.02 of short-term assets to pay obligations due within a year. Generally, a ratio above 1.0 signals good financial health, while a ratio below 1.0 may signal potential liquidity issues.

Even applying a more conservative view, TWE appears in reasonably good shape: It's quick ratio as on the end of its 2025 fiscal year was 1.12, meaning it has enough cash, cash equivalents and marketable securities to pay its obligations due within one year.

TWE's financial position looks even better in its latest quarterly report with a current ratio of 2.32 and a quick ratio of 1.24.