Who benefits from IPO mispricing?

The purpose of this study is to identify how far the stock prices, set in the process of public offering in Turkey, deviate from their fair values; to mark those who derive benefit from this deviation; to test methods used to reduce price deviations and to propose a model to ensure fair pricing. This study covers 240 public offerings taken place in Istanbul Stock Exchange between January 1993 and May 2007. In the study, what have been discussed within the framework of former theoretical and empirical studies held abroad and in Turkey are causes of public offering, advantages and disadvantages of public offering, public offering process, timing in the public offering, persons or institutions from whom services to be procured in public offering process and determination of public offering price under the title of ?concept of public offering?; performance of public offerings, sale methods applied in public offerings and their results under the title of ?short and long term performances of public offerings?. Under the title of ?price anomalies and interest relations? however, how much benefit and by whom is derived from the price anomalies that appear in the public offerings, and effectiveness of transactions applied to ensure price stability with a view to reduce price anomalies are tested at the empirical level. In the performed analyses, the findings obtained are such that underpricing did appear at an average of 9.16 percent on the first day of public offerings and therefore the stocks offered to public were not priced on their fair values, that mainly foreign institutional investors and domestic individual investors did benefit from this underpricing and that transactions applied to ensure price stability proved to be efficient in general. In this framework, Internet Based Single-Price Closed-Bid Auction method is a suggested method for reasons that it is resulted in a lower underpricing, that it is provided by lower interagency commission and that it creates a more efficient equal opportunity, with respect to other public offering methods.Key words: Public Offering, Underpricing, Money Left on the Table, Auction