There’s a new electric vehicle (EV) company on the block. For investors in this sector, sentiment has improved greatly around EV stocks. This is evidenced by today’s debut of Chinese EV stock U Power (NASDAQ:UCAR). At the time of writing, UCAR stock has surged more than 450%, making this sock a 5-bagger on its first day of trading.
Wild moves can often be seen on opening day for a particular stock. However, a move of more than 400% in a given day generally means an initial public offering (IPO) was mispriced.
The company announced the pricing of its IPO earlier this morning, noting that 2.4 million shares would be sold at $6 apiece to raise nearly $15 million. Investors clearly believe this company should be worth a heck of a lot more than its initial value. Indeed, the company’s afternoon surge signals a very enthusiastic investor base.
Let’s dive into what to make of today’s move in this EV stock.
UCAR Stock Soars on IPO
U Power is a unique company within the EV space, providing battery power solutions for the EV sector. The company also focuses on battery-swapping stations, which are becoming much more entrenched in the Chinese market.
The company intends to use the proceeds from this capital raise for development and marketing of its key products. Thus, for investors who believe U Power is a company that just needs a little capital to get over the hump, this is a stock to consider on its IPO.
Currently, shares of UCAR stock are trading around $33 apiece and have been halted multiple times for volatility. We’ll have to see if this move can hold up. But for now, it’s clear that investor interest remains high in this name.
Another factor to consider is that the supply of available UCAR shares may be artificially lower than the market’s demand on opening day. Thus, this is a stock that could see some sort of consolidation lower, as its valuation is fully contemplated by the market. Accordingly, this is a stock I think investors want to consider with caution. We won’t really know what the company’s worth until the market comes to a proper consensus.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
