Volkswagen shares leapt by 89.20 percent to 398.93 euros in morning trading on the Frankfurt stock exchange on Monday after Porsche said it had greatly increased its stake in the biggest European car maker.

The DAX index of leading shares had plunged by 3.19 percent overall.

On Sunday, Porsche said it now controlled 74.1 percent of the shares in Volkswagen, via a 42.6-percent direct equity stake and options giving it another 31.5 percent.

Porsche said it still aimed to increase its direct equity stake to over 50 percent by the end of 2008 and that it wanted to raise it further to 75 percent in 2009, "provided that economic conditions allow," a statement said.

Previously Porsche had said it held a 35-percent stake. Having more than 75 percent would allow it to seal a so-called domination contract giving it full financial control, and access to VW's cash flow.

Porsche's pursuit of Volkswagen has seen shares in the company swing wildly and often against the market as a whole in the past weeks.

Porsche said it had decided to reveal its position "owing to dramatic developments on financial markets," and to give investors a chance to square their positions "amid calm and without too much risk."

VW shares had been targeted by investors who practice short selling, essentially a bet that a share's price will fall, and found themselves obliged to buy shares in the company to repay those they had borrowed initially.

Porsche also expects the European Commission to issue shortly a decision on a new German "Volkswagen Law" that determines the strength of various VW shareholders, notably the German state of Lower Saxony, where VW is based.

After already slamming the old VW Law, the Commission has already indicated it does not consider the new law to be valid either, and a second condemnation of the legislation by an EU court would open the way for Porsche's takeover.

With Porsche now controlling more than 74 percent of VW and Lower Saxony holding around 20 percent, very little remains free-floating, which accentuates variations in the share's price, dealers and analysts noted.

By way of comparison with other German auto shares, Daimler had plunged by 11.71 percent to 19.79 euros in morning trades, while BMW was off by 7.37 percent at 16.91 euros.