Its the same reason you lock your door when you leave the house. You not accusing your neighbors of being criminal, its just wiser not to tempt fate. That way,

Its the same reason you lock your door when you leave the house. You not accusing your neighbors of being criminal, its just wiser not to tempt fate. That way, you are not inviting bad things to happen. This "peace of mind" factor has significant economic value, in that it frees up resources from "monitoring" potentially ambiguous motives and situations, and this improves the throughput for tasks related to running the business and making profits. With respect to the "market equilibrium" notion, theory and practice differ. Gaming the (any) system increases in liklihood as the un-eveness of outcomes is exaggerated; information flows become more assymetric; and/or they become more opaque. That is precisely the description of early stage investments. More or less. Hopefully this makes a bit of sense. The counter-argument as to "letting the market" reveal the information, is that it is unlikely to do so. There simply are not formal mechanisms for privately trades companies to disclose such information in a timely and transparent way. Remember, the companies are private explicitly to prevent this from occurring.