As per definition, http://msdn.microsoft.com/en-us/library/ms251779.aspx
Growing and Shrinking a Text Box
By default, text boxes are a static size. If you want to expand a text box vertically based on its contents, change the CanGrow property for the text box. If you want to allow the text box to shrink based on its contents, change the CanShrink property for the text box. You can access these properties through the Properties window or through the Textbox Properties dialog box.
But when you place the textbox within a data control like TABLE / MATRIX, the CanShrink property is never honored. At the same time the CanGrow property will always work as expected.
This is "By Design" behavior. The table row/column will not shrink below its definition height/width. This is in order to mitigate performance and memory concerns. Also the impact should be minimal, since we allow the row to grow.
You start with a small height for the table row and let it to grow to accommodate the content.