I don’t know. Why don’t sheep shrink in the rain?
Oh, this wasn’t the lead-in to a hilarious joke. I’m sad now. 😥
Mainly because shrinkage, felting or more correctly fulling occurs through agitation of wool and related animal fibres in heated water. So your sheep will shrink, but only if you put it in the washing machine on the Boil setting. Though frankly, shrinkage is the least of your sheep’s worries in that circumstance.