| FRANKFURT, 28 Oct
FRANKFURT, 28 Oct Volkswagen (VOWG.DE) briefly
became the world's biggest company by market value on Tuesday,
as short sellers continued to pile into the stock on weekend
news Porsche had bought up much of VW's remaining free float.
Shares in the German car maker hit an intraday high of
1,005.01 euros, valuing the company at 296.06 billion euros
($370.4 billion) based on ordinary stock, more than that of
worl'd number one company Exxon Mobil Corp's (XOM.N) $343
billion market value at Monday's closing price.
The shares later eased back to stand 25.4 percent higher at
652.00 euros at 1103 GMT, after tripling in the previous
Porsche PSH_p.DE said on Sunday it held over 74 percent
of VW, prompting a panic among short sellers who had sold VW
shares in the hope of buying them back at lower prices.
German regulator Bafin saud it was looking at the VW share
movement to see if any insider trading or market manipulation
had taken place.
"Each and any short seller in the world is trying to close
up their position and there is no way they can do it except for
trying to buy like mad," said FrankfurtFinanz analyst Heino
"Someone is selling it at a rather interesting and rich
price -- it is about 10 times as much as it should trade."
Analysts and traders said the stampede was historic for
German large caps.
"We were joking before about the share price hitting 1,000
euros, and all of a sudden, it was there," said one
Frankfurt-based trader. "This is perverse."
VW shares could continue to rise, or stay at current
historic levels, experts said.
"The problem is, from a fundamental point of view, shares
are really overvalued. But when the short squeeze comes to an
end, there are not enough shares available to bring the share
price back down," said one Frankfurt-based analyst.
Despite the massive rise in VW shares and talk of little
free float remaining, the Frankfurt Stock Exchange said it did
not plan any changes in the German blue-chip DAX index
It has said in the past that if the free float in
Volkswagen's ordinary shares were to fall below 5 percent, the
Frankfurt Stock Exchange's index revision committee would
automatically replace them in the DAX index with the top-ranked
stock measured by free-float market capitalisation and trading
Germany's financial regulator said it was looking at the VW
share movement for possible insider trading or market
manipulation, but had not yet launched an official examination.
PORSCHE RAISES STAKE
Porsche (PSHG_p.DE) said on Sunday it held stock and
options equivalent to 74 percent of Europe's biggest carmaker
and aimed to push through a domination agreement next year that
would give it management control and capture VW's mighty cash
This will almost certainly meet objections from VW's home
state of Lower Saxony, which controls just over 20 percent.
[nLQ46943]. In return for losing their dividend, minority
investors would get an annual cash payout set by Porsche.
Analysts questioned Porsche's motives in announcing its
holding, and suggested the company may have wanted to cash in
one last big jackpot at the expense of unsuspecting investors.
Tim Schuldt, an analyst at Equinet, said Porsche's
announcement seemed like an invitation for hedge funds to pile
into the stock and cover their shorts. He said the problem was
that there was only a free float of around 5.8 percent, and
many of these free floating shares were actually held in
index-tracking funds and other portfolios.
"For Porsche we don't know their real intentions ... it
could be that if they managed to cash in at these levels
obviously that would be extremely positive for their share
price, for the value of their company," said Schuldt.
Shares in Porsche, who was not available for immediate
comment, was up 6.8 percent.
For a chronology, of Porsche's takeover of VW please double
click on [nLQ622493].
(Reporting by Sarah Marsh, Tim Hepher, Tyler Sitte,
Alexander Huebner and Sabine Wollrab; Additional Reporting by
Annika Lehmann, Christiaan Hetzner; Editing by Andrew Callus)