Fernando Tatis Jr.’s $340-Million Deal Isn’t Worth What You Think
Tatis and the San Diego Padres agreed to a 14-year extension earlier this week
Earlier this week, news broke that 22-year-old Fernando Tatis Jr., who has played all of 143 games in the major leagues, agreed to a 14-year, $340 million contract with the San Diego Padres.
The contract, which is the third-largest deal in baseball history behind only MVP winners Mike Trout of the Los Angeles Angels and Mookie Betts of the Dodgers, is the longest in MLB history and should set up Tatis and his family for the rest of their lives.
But while Tatis will be banking a boatload of money over the next decade and a half, he won’t be taking home as many greenbacks as you might think.
In addition to paying out approximately $191,020,000 in federal and state income taxes over the course of his deal, including so-called “jock taxes” which are imposed by states or cities on visiting teams’ players for games played in their jurisdictions, Tatis signed a contract with an investment firm that gave him advances in salary when he was making peanuts as a minor leaguer.
In exchange for the payments, Tatis agreed to relinquish a percentage of his future earnings to Big League Advance if he became an MLB player, Sportico reports.
It is unclear how large an investment the firm made in Tatis and how much of a stake (between 1% and 10%) it has in his future earnings, but Big League Advance CEO Michael Schwimer told Sportico the company offered more to Tatis than any player before him. If the company’s stake is 5%, Big League Advance is owed $17 million from Tatis’ new contract. If Tatis had never made the majors, Big League Advance would have lost its initial stake.
Clearly, the gamble on Tatis, who the company’s predictive model identified as the second-best minor league player of the past 15 years when he was playing in Single-A five years ago, is going to pay off.
“When we signed him he wasn’t considered a Top 40 prospect,” Schwimer told Sportico. “At the time, talking to investors, the amount of money we were offering him was a sizeable portion of our bankroll. But we trusted the model.”
Still, there’s no way even the most optimistic prediction could have forecast Big League Advance making so much from Tatis, who got the largest contract ever awarded a player not yet eligible for arbitration, so soon.
“We’ve been living in theoretical land in the five years since we started this because it takes a while after signing a bunch of A-ball players for them to get to big deals,” Schwimer said. “To see it come to life, it’s a really cool day.”
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