"The short case is starting to come together," said Ben McGarry from Totus Capital who is short the stock.
"We have a business [in TWE] which has had its ups and downs over the years and is now priced for eternal good news, but there are now a few cracks starting to appear."
Another fund manager, who is also short the stock and asked not to be named, said Treasury was worried by the lack of detail in the accounts, while he was concerned by Mr Clarke's share sales and had identified his own oversupply issues in China.
"There are a few red flags starting to appear and there is enough evidence to say the valuation is way too stretched," he said noting the stock was trading on 26 times next year's earnings, compared to around 16 times for the broader market.
"I am very comfortable being short the stock."
He also noted Treasury had "owned up" to some difficulty in getting wine into China since April this year.
Mr Clarke said these were short term problems.
"I don't think it will be a long term issue. We have demonstrated out ability to work through these issues," he said.
In a note to clients Deutsche Bank analyst, Michael Simotas, said Treasury management had done a good job of explaining its position on the inventory levels in China, but maintained his hold rating on the stock with a price target of $16 a share.
"Today's [Thursday] sharp share price reaction serves as a reminder that the valuation leaves little room for error," he said.
Mr Simotas also noted the over-supply issues had been bobbing around the market for some time.
Mr Clarke took a swipe at those analysts who had raised the issue in recent months and in its statement to the ASX Treasury cautioned the market about relying "on feedback from selected customers in China".
Mr Clarke said it was not usually the company's practice to comment on market and media speculation, but he was making an exception as he did not wish the issue to "snowball".
Credit Suisse raised the issue of an over-supply of Rawson's Retreat in a note to clients last week.
"To date, management of the brand has not been perfect in China with TWE allowing volume to run ahead of demand and signing up inferior distributors," Credit Suisse said.
"This occurred during the December 2017 and June 2018 half-year period. This resulted in retailer and wholesaler margins collapsing."
This has resulted in Rawson's being cheaper in China than in Australia, despite higher taxes and shipping charges, while some distributors are even giving it away for free, when bundled with premium Penfolds labels, in an effort to clear stock.
Chinese online retailer Yesmywine.com is selling Rawson's at 189 yuan for six bottles or 31.5 yuan ($6.59) per bottle.
This compares to advertised prices of between $7.99 and $11 in Australia.
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