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Short sellers make VW the world's priciest firm

A share trader points on the curve showing the course development of the shares of German car manufacturer Volkswagen AG on a trading terminal at the German stock exchange in Frankfurt, October 28, 2008. REUTERS/Kai Pfaffenbach

Volkswagen (VOWG.DE) briefly became the world's biggest company by market value on Tuesday, as short sellers caught betting on a price drop with borrowed stock scrambled to find shares after a buying spree by Porsche (PSHG_p.DE).

Short sellers desperate to close their positions paid as much as 1,005 euros a share during the session following Sunday's news that there was less than 6 percent of VW voting stock still floating in the market.

At that price Volkswagen's voting stock was worth 296 billion euros ($370 billion), or more than the $343 billion market capitalization of Exxon Mobil (XOM.N).

VW shares later closed trading on Tuesday up 82 percent at 945 euros.

The share price has rocketed since Porsche revealed in a surprise announcement on Sunday that it had effectively gained control of 74 percent of Volkswagen's voting shares.

In March, when Porsche was still sitting on a long-held 31 percent direct stake, it said it was not seeking to increase its holding to 75 percent, bearing in mind that the state of Lower Saxony holds a 20 percent stake in VW.

"The speculation of going to 75 percent overlooks the realities of the shareholder structure of VW, Porsche said at the time.

"In view of the fact that Lower Saxony as second largest shareholder owns 20 percent of VW, the probability of acquiring the necessary shares in freefloat is extremely low."

Meanwhile on Tuesday a spokesman for German market regulator BaFin said it was looking into the VW share price movement for any...