Water alone wont cause a short on a wire with a single path of electric travel. Water will only short one wire to another or to a ground.
Neither of the 4 wires coming off my stator have a water tight seal but I can spray my quad down, drive through water and mud and it doesnt die.
However if water gets into the stator it can cause the coils to arc to ground and create shorts so power never makes it to the coil. Likewise theres several thousand volts of current going through the high tension lead to the spark plug. As mentioned before, the coil wire itself being damaged could cause this, the body of the coil being cracked really could cause this, water in the stator could cause this, and water getting into the carb could cause this.
Also, if the die electric grease is put on too much, and 2 wires with the grease touch, that grease because its electrically conductive can cause a short between 2 wires.
So, if you are going to use it, use it sparingly. Dont gob it on. And wipe anything off that comes oozing out.