VOLKSWAGEN briefly became the world's biggest company by market value yesterday 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 (US$1,261) in Frankfurt yesterday , valuing the company at 296.06 billion euros based on ordinary stock, more than that of world No. 1 firm Exxon Mobil Corp's US$343 billion market value at Monday's closing price.

The shares later eased back to stand 25.4 percent higher at 652.00 euros.

Porsche said on Sunday it held more than 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 said 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 Ruland. '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.'

A Frankfurt-based analyst 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.'

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.