What happened

A day after more than doubling in its market debut, VinFast Auto (VFS -3.35%) is giving back some of those gains. Shares of the Vietnamese electric vehicle maker traded down 25% on Wednesday morning as investors continue to sort out what this start-up is really worth.

So what

VinFast is a small electric vehicle manufacturer with large ambitions. On Tuesday, the company made its market debut via a merger with special purpose acquisition company (SPAC) Black Spade Acquisition, and quickly surged from $10 per share to close at $37.06 after its first day.

At Tuesday's close, VinFast was valued by the market at $85 billion. By comparison, Ford Motor and General Motors have market capitalizations of $48 billion and $45 billion, respectively.

There's a whole lot of potential baked into that valuation. VinFast is not profitable and delivered just 11,300 vehicles in the first half of the year. VinFast lost $2.1 billion in 2022 and reported first-quarter revenue down 49% year over year.

With only about 1% of the shares outstanding available to trade, VinFast shares are likely to be highly volatile as investors try to determine how to value the company from here.

Now what

There is a long history of non-U.S. automakers starting slow with entry-level vehicles and progressing up the value chain over time. If automakers from Japan and South Korea were able to do it in the past, there is no reason why a Vietnamese automaker can't repeat the process and grow substantially in the years to come.

The question for investors is: How much do you pay for that potential? Even after the Wednesday morning decline, VinFast still has a market capitalization larger than either Ford or General Motors.

It took Toyota Motor decades to establish itself internationally. Even if the introduction of electric vehicles is creating new paradigms, it seems likely that it will take a significant amount of time for VinFast's best-case growth scenario to play out.

Investors interested in buying in to this speculative growth stock should keep their seatbelts fastened and expect a lot more bumpy days up ahead.