I haven't fired an MP40, but I have fired a variety of 9mm sub guns. I also used to own a .22 semi auto that was of a very similar configuration to an MP40, with the wire stock, etc.
Shooting it with the stock folded was pretty pointless, really. It was too heavy to hold out like a pistol and have any real accuracy, and the balance sucked hard, too. You could fire it from the hip, using your off-hand on the front of the magazine well, but outside of 3-7 yards or so you weren't going to hit anything.
Having a folding stock is more for storage / transportation than anything else. It's a lot easier to carry around with the stock folded, but you really don't want to shoot that way.
Exactly.