Critics of capitalism have thoroughly enjoyed this month’s ding-dong over the value and governance structure of litigation funder Burford Capital. Here was one specimen of corporate leech, a business betting on the outcome of other people's legal actions under attack by another, Muddy Waters, which earns money by taking a position on stocks it thinks the market can be persuaded are over-valued - and then makes sure the market knows about it.

Surely this is one of those fights where you want both sides to lose?

There's another way of looking at it. Litigation funding and short-selling are both mechanisms for applying scrutiny. Litigation funding, in theory, anyway, puts an early price on the merits of a case, allowing the parties to make decisions accordingly.

'Take-down' artists likewise shine a spotlight on corporate behaviour with a rigour that seems beyond the powers of government regulators or investigative financial journalists, bound as they are by defamation law. 

Since the beginning of this month, shares in Burford Capital Limited on London's alternative investment market have fallen from 1,504p to 786p thanks to Muddy Waters' attack. Its public onslaught opened on 7 August with the publication of a research report alleging that Burford had been misrepresenting returns and that its corporate governance arrangements were 'laughter inducing'. 

Burford responded robustly, denying misrepresentation and accusing Muddy Waters of illegal market manipulation; 'shorting and distorting' is the colloquial expression. Muddy Waters denied this in turn, saying it had retained former CIA lie-detection experts to assess the credibility of Burford's statements. 

What the long-term fallout will be remains to be seen. But Muddy Waters' attack will clearly have lasting consequences. 

For Burford, it has proved a wake-up call on governance. Claiming 'we have listened', the company announced the replacement of its chief financial officer, who was married to the chief executive, and the refresh of its board, which had been unchanged since 2009. It also announced plans to procure a second listing, possibly on the New York main market. It conceded 'There are some preliminary legal matters to resolve... and that process may take several months.'

This would be a welcome move for transparency. The Burford affair has exposed several shortcomings in the governance of the London alternative investment market, where it is by far the largest stock. The AIM All-Share Index has fallen more than 6% this month. Questions will be asked about why other companies listed there prefer the less stringent reporting restrictions of the junior market. 

The affair has also turned City commentators' attention to the litigation funding market as a whole. As Private Eye's In the City column observes this week, while Burford's stock was seen as a winner, 'nobody looked too hard'. This has now changed, and some commentators, such as The Times' City editor, are suggesting that the inherent uncertainties of the litigation funding business make it unsuited to public listing. 

I would say the opposite: the transparency requirements of the main market are just what the sector needs. Along with the merciless scrutiny of take-down artists.