03 July 2012

Amateur Acquisitions: Analyzing unsigned picks in Shadow Draft

Earlier today we took a look at the current state of amateur acquisitions on the international market and vis-a-vis the remaining unsigned picks in the June Amateur Draft.  Before continuing with this entry it might make sense to peruse that piece if you haven't alreadyThe loose conclusion of each respective discussion was that:

  1. fans should hope Baltimore does more on the international front but be comforted in the efforts of the remaining AL East teams being limited starting next year; and
  2. it doesn't just matter that Baltimore is able to sign Gausman (1st), Poche (5th Rd), and Velasquez (15th Rd over-allotment), it matters how the Orioles sign them.

We are focusing on the second point for this piece and applying to your humble ESPN SweetSpot blog the same standards we levied on the professionals in the Warehouse.  So we ask ourselves -- did Camden Depot spend efficiently and effectively in the Shadow Draft?

Here is a breakdown of our signings thus far and a note as to our current status vis-a-vis pool allotment:

1:4 -- Kevin Gausman (rhp, LSU): Unsigned (allotment $4.2 MM)
2:4 -- Tanner Rahier (ss/2b, Palm Desert HS, Calif.): Shadow bonus $700,00 (allotment savings $93,700)
3:4 -- Avery Romero (3b, Menendez HS, Fla.): Unsigned (allotment $481,100)
4:4 -- Ty Buttrey (rhp, Providence HS, N.C.) Shadow bonus $1.3 MM (overage $950,100)
5:4 -- Lex Rutledge (rhp, Radford) Shadow bonus $200,000 (allotment savings $62,000)
6:4 -- Josh Elander (c/of, TCU) Shadow bonus $196,200 (allotment savings $0)
7:4 -- Jeremy Rathjen (of, Rice) Shadow bonus $25,000 (allotment savings $125,000)
8:4 -- Zach Cooper (rhp, Central Michigan) Shadow bonus $15,000 (allotment savings $115,000)
9:4 -- Michael Boyden (rhp, Maryland) Shadow bonus $10,000 (allotment savings $120,000)
10:4 -- Chris Kirsch (rhp, Lackawanna College) Unsigned (allotment $125,000)

Total savings: $515,700
Total overage: $950,100
Current status: $434,400 over allotment
Available taxable amount without losing pick: $341,000 (with tax, $597,350)

Provided Kirsch signs (he was drafted by the Nats in the 31st Round), we should realize around $120,000 in savings there, which means we would have the money to sign Romero and Gausman to their allotted amount while incurring a tax of about $250,000. 

Now, keep in mind that Romero could be an over-allotment signee, given his option to attend the University of Florida.  That means that, if Kirsch doesn't sign, we would have to sign Gausman at enough of a discount to cover the additional $90 K to cover Buttrey's overage, as well as any other overage required to sign Romero.  If Romero does not sign, we would target signing Gausman for $3.75 MM so as to avoid paying tax on the Buttrey overage.

If we were required to pay the extra $250,000 or so in tax, I would view this as much more tolerable as applied to Buttrey than it would be as applied to Vasquez (discussed in this morning's piece).  Why? the overage essentially bumps Buttrey's cost to a little over $1.5 MM (with $1.3 MM going to the player).  That difference is the difference in spending allotment for the 33rd overall pick and the 40th overall pick.  Essentially, it is negligible. We had Buttrey valued as a supplemental-1st round talent, including risk profile, and regardless of whether we pay the $250,000 tax or not we are getting him for early-supplemental-1st round money.

Any overage required to sign Avery (provided he signs) would be covered by savings on Gausman and on our 7th, 8th and 9th round picks.  The tradeoff, of course, is that we went for cheaper senior signs in these spots as opposed to Baltimore essentially playing the board with selections willing to sign for around slot allotment.  Our analysis was that the difference between our expected return on our senior signs and our expectation for return for Baltimore's "play the board" picks are far outweighed by the greater upside we get in the form of Rahier/Romero/Buttrey over Baltimore's 2nd, 3rd and 4th Round selections of Branden Kline (rhp, UVA)/Adrian Marin (2b/ss, Gulliver Prep, Fla.)/Christian Walker (1b, South Carolina).

The risk, of course, is that Romero and Buttrey require more overage than we can cover, which means we have to either decide not to include one in our Shadow System, or forfeit our first round pick next year.  We certainly pushed the envelope as far as draft spend is concerned, but I feel strongly that our approach did a better job of leveraging our pool allotment to bring in the best collection of talent possible.  It will be interested to see how it all plays out and you can be sure we'll be spilling more internet ink on this topic in the coming weeks.

As a final note, if the Gausman signing goes right, Kirsch signs, and Romero signs for an amount that is not much more than allotment, we could have enough left over to ink Velasquez as well:

Current status: $434,000 over allotment
Gausmen signing $3.7 MM (allotment savings $500,000
Romero signing $600,000 (allotment overage about $110,000)
Kirsch signing $10,000 (allotment savings $115,000)
Updated status: $71,000 savings
Taxable overage available: $341,000

That would give us $412,000 to add to the $100,000 allotment currently in place for Velasquez.  Were Romero to sign for slot allotment, or were Gausman to sign for $100,000 less, we'd have over $600,000 to offer to Velasquez. Keeping in mind the tax makes sense in the context of our Buttrey overage, and this would be quite a draft haul.

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