Volkswagen has become the world's most valuable company after oil giant Exxon. The German car maker's shares more than doubled on Monday after its smaller rival Porsche moved to take control of Europe’s biggest carmaker. The sucker punch  sent hedge funds reeling as they scurried to cover short positions. The funds were forced to buy stock from a contracting pool of shares in free float.

VW shares jumped 147% after Porsche said that through the use of derivatives it had increased its stake in VW from 35 to 74.1%, triggering outrage among investors and analysts.

VW had a free float - - shares available for trading - -  of only 5.8% and the state of Lower Saxony owns a 20.1%.

On Tuesday, the shares have jumped more than 50%.

Bloomberg says Volkswagen has risen more than six-fold this year, valuing it at €294 billion,  more than Exxon Mobil Corp.'s $343 billion market value at yesterday's close.

Volkswagen AG became the world's biggest company by market value after Porsche SE announced plans to raise its stake in the German carmaker to 75%, triggering demand from short-sellers.

One analyst says that Porsche may have wanted to cash in at the expense of unsuspecting investors. "To have shorted the stock hedge funds must have inadvertently borrowed stock from Porsche," said Max Warburton of Sanford Bernstein.