Schoop locks in early pay-day for future earnings

[VTech]

At first, I thought he signed an extension but seems he got a lump sum of $4.91M for 10% of future earnings. I never heard of this thing before, pretty interesting idea. Article reads that he is less likely to sign an extension now since he locked in some early cash

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Franco, Schoop, McHugh, Duffey, Solarte trade future earnings for up-front pay. Get details: <a href="https://t.co/45yUxmTzCy">https://t.co/45yUxmTzCy</a> <a href="https://t.co/HyQJAsabat">pic.twitter.com/HyQJAsabat</a></p>— MLB Trade Rumors (@mlbtraderumors) <a href="

">April 28, 2016</a></blockquote>

<script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script>

[Filmstudy]

At first, I thought he signed an extension but seems he got a lump sum of $4.91M for 10% of future earnings. I never heard of this thing before, pretty interesting idea. Article reads that he is less likely to sign an extension now since he locked in some early cash

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Franco, Schoop, McHugh, Duffey, Solarte trade future earnings for up-front pay. Get details: <a href="https://t.co/45yUxmTzCy">https://t.co/45yUxmTzCy</a> <a href="https://t.co/HyQJAsabat">pic.twitter.com/HyQJAsabat</a></p>— MLB Trade Rumors (@mlbtraderumors) <a href="

">April 28, 2016</a></blockquote>

<script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script>

Very interesting. I wonder which investors are underwriting this risk and how the shares are paid off (article is not clear). I also wonder if the IRS has bought into this concept (whose IT rate is used? Is there double taxation?).

[Going Underground]

Looks like you have to sign up on the website.

In order to access Fantex Tracking stocks, you’ll need to establish a brokerage account with Fantex Brokerage Services. All applications are subject to approval and may require a minimum balance.

Please provide the information below prior to beginning your application for an individual account.

Here are some stock trades of players from last year.

The four stocks currently trading on the site all reflect the recent fortunes of the athlete on the field, which means that in one sense, the concept is working as it’s intended. Sanu and Jeffery, who had good numbers last season, are up (Sanu to $13, Jeffery to $11), while Vernon Davis is down (to $8.10) and Buffalo Bills quarterback EJ Manuel, who played poorly, has crashed to $4.40. St. Louis Rams tackle Michael Brockers will be the next stock to go public.

http://fortune.com/2015/03/31/athlete-stock-exchange-fantex/

[atomic]

So they believe Schoop is going to make more than 49 million in future earnings. Rather risky bet if you ask me.

[DrungoHazewood]

So they believe Schoop is going to make more than 49 million in future earnings. Rather risky bet if you ask me.

Let's say in his three arb years he makes 2, 4, 8 million. That's $14M, plus the maybe $2M he'll earn his first three. So $16M going into free agency. Meaning he'll have to be worth 49-16 or $33M in free agency. That's maybe four or five wins. What percentage of players similar to Schoop are worth at least four wins in free agency? That's almost more art than science since you need to develop a list of comparables from a niche profile; young, powerful, strike-zone challenged middle infielders.

Here's a list: Nap Lajoie, Carlos Baerga, Juan Samuel, Robinson Cano, Bill Hall, Rougned Odor, Bret Boone, Schoop, Frank Catalanotto, Jorge Cantu, Alfonso Soriano. I figure most of them were more than worth a $33M deal in free agency.

[Camden_yardbird]

It will be interesting to see how this model goes. If successful and profitable for the players it could have a long term impact on small market teams like TB or Pittsburgh who have been successful in recent years at convincing their young talent to sign extensions. Players who access the fantex upfront the money may be willing get to accept more risk in order to reach free agency earlier and not give up free agent years in an extension. And although MLB has accepted the Heaney deal I would wonder at what point this system might require a deeper dive. What if one of the "investors" is able to put pressure on a player to not accept an extension in favor of trying g to get to free agency faster? Is that investor now an agent? Lots of questions.

[Aristotelian]

Can one buy short options?

[Just Regular]

I do not like this, looks to me like a clear negative for the macro-issue of the decade, can we buy any of Manny's FA years? I saw the Gallardo and Davis deals through the lens of assembling Manny's supporting cast for the short and long term, and regard Schoop as the Pippen. I've been rooting for a breakthrough with him along Wong/Gyorko/Crawford lines, but I think this puts a significant dent in those chances.

[UpstateNYfan]

Pretty shadowy IMO. Lots of potential for corruption. Hedge funding, betting against performance projections. I don't think MLB and possibly the union will like it. I can imagine a scenario in the new contract where arbitration will be offered earlier in a player's career.

[Can_of_corn]

Pretty shadowy IMO. Lots of potential for corruption. Hedge funding, betting against performance projections. I don't think MLB and possibly the union will like it. I can imagine a scenario in the new contract where arbitration will be offered earlier in a player's career.

What will the players give up for such a potentially large bump in earnings?

[accinfo]

Very interesting. I wonder which investors are underwriting this risk and how the shares are paid off (article is not clear). I also wonder if the IRS has bought into this concept (whose IT rate is used? Is there double taxation?).

As a CPA the IRS doesn't have to buy into any of it. Individual income is recognized when received. So Schoop gets an upfront payment it is all income at the time received. Whatever he pays out in the future to these investors/agency is a legal deductible business expense against future earnings. There is no double taxation.

[OFFNY]

o

 

This reminds me somewhat of what the Indians did in the early-to-mid 90's, which helped them to win 2 American League Pennants for the first time since 1954, 5 consecutive post-season appearances, 6 post-season appearances in 8 years, and 8 consecutive winning seasons.

They locked up numerous of their potential young stars before they were eligible for arbitration by giving them much more than the minimum salary. So they spent a lot more money than they had to in the short run, and simultaneously made a financial commitment to these players in the long run.

They took a risk, and it worked out well for them. I see this as a win/win situation with the Orioles and Schoop. Schoop is financially secure, and the Orioles have a potential future discount in his future years with the team (as did the Indians wound up having back in the 90's and early 2000's with their players.)

 

o

[Can_of_corn]

o

This reminds me somewhat of what the Indians did in the early-to-mid 90's, which helped them to win 2 American League Pennants for the first time since 1954, 5 consecutive postseason appearances, 6 postseason appearances in 8 years, and 8 consecutive winning seasons.

They locked up numerous of their potential young stars before they were eligible for arbitration by giving them much more than the minimum salary. So they spent a lot more money than they had to in the short run, but simultaneously made a financial commitment to these players in the long run.

They took a risk, and it worked out well for them. I see this as a win/win situation with the Orioles and Schoop. Schoop is financially secure, and the Orioles have a potential future discount in his future years with the team (as did the Indians wound up having back in the 90's and early 2000's with their players.)

He didn't make this deal with the Orioles.

He made it with an outside party.

[OFFNY]

This reminds me somewhat of what the Indians did in the early-to-mid 90's, which helped them to win 2 American League Pennants for the first time since 1954, 5 consecutive postseason appearances, 6 postseason appearances in 8 years, and 8 consecutive winning seasons.

They locked up numerous of their potential young stars before they were eligible for arbitration by giving them much more than the minimum salary. So they spent a lot more money than they had to in the short run, and simultaneously made a financial commitment to these players in the long run.

They took a risk, and it worked out well for them. I see this as a win/win situation with the Orioles and Schoop. Schoop is financially secure, and the Orioles have a potential future discount in his future years with the team (as did the Indians wound up having back in the 90's and early 2000's with their players.)

He didn't make this deal with the Orioles.

He made it with an outside party.

Oh.

So much for that theory.

[Frobby]

This is a fascinating development, and one that the MLB owners may not like much. I wouldn't be surprised to see this issue become a point of discussion in the CBA talks.

In essence, it's a form of insurance. And it certainly reinforces the idea that the players are commodities.

I wonder what a "Manny future" would sell for?