Bizarre stock market activity made Volkswagen briefly the world's biggest company by market value on Tuesday.

The carmaker's shares peaked at 1,005 euros, which valued the company at 296bn euros ($370bn; £237bn), which is well over Exxon Mobil's $343bn value.

The panic buying was caused by traders who had short-sold VW shares desperately trying to buy them back so they could close their positions.

Porsche bought VW shares at the weekend, leaving few others available.

On Sunday, Porsche announced that it owned, or had options to buy, more than 74% of Volkswagen's shares.

VW's home state of Lower Saxony controls 20% of the shares, leaving just over 5% available on the market.

'Buy like mad'

Before Porsche's announcement, many traders had been betting on VW's shares falling.

They had borrowed VW shares and sold them in the market, planning to buy them back when the shares had fallen, return them to the lender and pocket the difference.

But what actually happened was that the shares rose as a result of Porsche's effective takeover and the traders found themselves forced to buy the shares at any price to close their positions.

In afternoon trading, VW shares had fallen back to 686 euros, up 32%, following Monday's rise of 146.6%.

Last Friday, the shares closed below 200 euros.

"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 Heino Ruland, an analyst at FrankfurtFinanz.

As an indication of how silly the market valuation is, Exxon last year made profits of $41bn on sales of $390bn. It employs 80,800 people worldwide.

Volkswagen managed profits of about $8bn on sales of $136bn.



