Volkswagen briefly became the largest company in the world by market value

Volkswagen’s regular shares are trading at over €850, down a bit from the intra-day high of €1005.

At €1005, market capitalization of Volkswagen comes out to over €296 billion (about $368 billion), toppling Exxon Mobil’s $343 billion valuation.

The sudden jump in the share price from €205 on Friday last week to €1005 today has largely to do with Porsche disclosing it has acquired options to bring its effective stake in Volkswagen up to 74.1%, decreasing available float to approximately 6%.

Hedge funds, which have shorted more than 12% of Volkswagen shares, faced potentially unlimited liabilities, and started buying up shares to cover their positions at pretty much any cost.

To put it more plainly, no one thinks Volkswagen’s worth that much money – it’s just that hedge funds got royally screwed by Porsche in complex derivative trading, and it’s now buy or die for them.

Update: Financial Times has posted an article specifically about this ridiculousness.

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