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With IPO, Alibaba Hopes To Compete In The West

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MELISSA BLOCK, HOST:

Shares of the Chinese e-commerce company Alibaba began selling on the New York Stock Exchange today and it was a pretty impressive performance. Alibaba shares were sold to insiders for $68 and finished the day at nearly $94. The surge in price makes Alibaba, which is little known in the United States, one of the biggest and most powerful Internet companies in the world. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: Before today it was unclear whether the Alibaba initial public offering would meet expectations. The company has a huge presence in China but retail investors in the United States weren't said to be showing all that much interest in the company. That all changed today. At one pint shares were selling a nearly $100 each.

JAY RITTER: This is for investors who bought at the offer price phenomenal.

ZARROLI: Jay Ritter is a professor of finance at the University of Florida.

RITTER: The first day capital gains on the 368 million shares sold is approximately $10 billion, more than any IPO in human history.

ZARROLI: On the floor of the New York Stock Exchange Alibaba's energetic founder, a former English teacher named Jack Ma, fielded congratulations with his usual air of studied humility. Ma is now a billionaire many times over and many of his employees are millionaires. But appearing on CNBC Ma insisted the money wasn't important.

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JACK MA: So to me the price up and down and all, my people worry about it. I worry about whether the customer happy?

ZARROLI: Customers, he said are his priority, followed by his employees and then his shareholders. That is his Ma's mantra and it has helped make Alibaba hugely popular with Chinese consumers and businesses. Now Alibaba is hoping to compete in the West and the money raised today will give it a big leg up says Kathleen Smith of Renaissance Capital.

KATHLEEN SMITH: It will have based on the IPO proceeds, both the capital and also the currency in its stock to expand.

ZARROLI: A few years ago Smith says investors in the West turned away from Chinese companies, in part because of doubts about their accounting practices. But the huge growth in Asia has proven irresistible to investors and lately Chinese IPOs have been pretty successful.

SMITH: The 11 and now Alibaba's the 12th that have been done so far this year, have traded up - not a single one down. So that's getting investors' confidence that, you know, maybe the coast is clear.

ZARROLI: That's not to say there aren't some residual doubts about Alibaba shares. Some corporate governance experts both in the U.S. and Europe have warned about the company's shadowy management structure. The board is controlled by a select group of more than two dozen shareholders and other investors have no say in the matter. Jay Ritter says the company's share price may also be a bit high.

RITTER: Investors are paying a price that's reflecting very optimistic assumptions about those future profits. If the company doesn't deliver the stock price is going to suffer.

ZARROLI: Some of the biggest IPOs in recent years have proven disappointing. Shares spiked on opening day and then gradually deflated. But so far at least a lot of investors remain pretty excited about Alibaba's prospects and they're willing to tuck aside any doubts they may have about the company. James Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.

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