[FT]VW vies for title of world’s biggest company

VW vies for title of world’s biggest company
By Richard Milne in London
Published: October 28 2008 09:34 Last updated: October 28 2008 11:02
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Volkswagen briefly became the world’s largest company by market capitalisation on Tuesday as panic-buying by hedge funds desperate to cover losses caused its value to shoot up by up to €150bn.
Shares in Europe’s largest carmaker soared as high as €1,005 in early trading, having closed at about €210 on Friday. That gave it a market capitalisation of around €296bn ($369bn), higher than that of ExxonMobil, the oil company that closed on Monday with a value of $343bn.
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EDITOR’S CHOICE
Daily View: VW briefly the world’s largest company - Oct-17
Lex: Japanese carmakers - Oct-28
In depth: Auto crunch - Oct-24
Hedge funds hit as Porsche moves on VW - Oct-27
Porsche accelerates towards VW control - Oct-27
Porsche plans to raise VW stake to 75% - Oct-26
VW’s share price was highly volatile on Tuesday morning and was up 50 per cent in late morning trade at €788, giving it a market capitalisation of €237bn ($296bn), still bigger than that of Wal-Mart, Microsoft and General Electric – the second, third and fourth-largest companies in the US.
“I have hedge fund managers literally in tears on the phone,” said one London-based auto analyst. Hedge funds had bet that VW’s share price would fall but after Porsche disclosed it held 74 per cent of the carmaker rather than the previously assumed 35 per cent there was a huge scramble to cover positions.
Analysts and investors said some hedge fund failures were likely because of the size of the losses, which reached about €20bn-€30bn on Tuesday. They also called for a full investigation by Bafin, Germany’s financial regulator, into whether there was market manipulation.
Porsche has denied that it lent its shares out to hedge funds. It said that it revealed it held 74 per cent directly and indirectly to allow hedge funds to unwind their short positions in “an orderly manner”.
Bafin on Monday repeated its comments from last week that it was looking at, but not formally investigating, the share price movements.
But analysts, investors and corporate governance experts said the share price movements were bringing Germany’s capital markets into disrepute.
Max Warburton, analyst at Sanford Bernstein, said: “It is a huge question for regulators and arguably an embarrassment for all European capital markets.”
Christian Strenger, a board member at Germany’s largest fund manager, DWS, and a leading corporate governance expert, said: “It should get the politicians and supervisory authorities to think again about allowing this untransparent situation.”