Sun Sentinel Palm Beach Edition
Curveball to moneyball
Padres’ Tatis took ‘advance’ as budding prospect, now owes part of $340M contract
NEW YORK — Fernando Tatis Jr.’s payday from baseball’s longest contract is not quite what it appears.
The 22-year-old star shortstop signed a 14-year, $340 million deal with the Padres, the third-highest deal in the sport’s history.
But the son of the only major leaguer to hit two grand slams in one inning will be giving up a percentage of his fortune to Big League Advance, a company founded in 2016 by former minor league pitcher Michael Schwimer to invest in prospects making low salaries. Think of it along the lines of stock traders buying Apple in the company’s early years.
Tatis agreed to receive money from BLA when he was just a budding prospect in exchange for part of his future salary.
Only a small percentage of minor leaguers make it to the major leagues, and even a smaller chunk sticks long enough for the big paydays of salary arbitration and free agency. And Big League Advance develops computer programs to try to predict future All-Stars and then tries to invest in those players before they are known, well, commodities.
“For us as a company, it’s really a testament to our modeling capabilities and how well we’ve been able to predict success of minor leaguers,” Schwimer said Monday. “When we did a deal with Fernando Tatis Jr., he wasn’t a top 50 prospect on anybody’s list. And here our numbers said he was the second-best player in the last 15 years, including Mike Trout, (Bryce) Harper and all these guys. That’s what our modeling told us. It was actually a really scary thing investing the amount of money we invested in it. It was a sizable portion of our fund. But at the end of the day, we decided to trust the numbers and trust the process, and it really, really worked out.”
Big League Advance has invested in 344 players, including 20 signed in the last two months, and the vast majority are not on 40-man rosters.
The company’s first $26 million fund, which closed in 2018, invested in 77 players, of which Schwimer said 83% were outside the top 300 prospects when the player was signed. Of those 77 players, he said 45 had reached the major leagues, a percentage he attributes to the company’s data analysis and predictive skills.
The second fund raised $130 million. Schwimer said BLA has had about 200 people invest the $156 million.
Tatis and other players who sign with BLA get an upfront payment in exchange for a percentage of their future earnings. Schwimer said the average paid to a player is $350,000, without confirming any individual’s figure.
“It was just a family decision,” Tatis said. “I’m just going to call it that way.”
Money the players receive from the company is taxable income, but they are not taxed on money they owe the company.
The only available contract involves Padres catcher Francisco Mejia, which became public when he sued BLA in U.S. District Court in Delaware in February 2018. Mejia alleged he signed three contracts with BLA in September, November and December 2016, and he received $360,000 as part of agreements in which Mejia agreed to repay the company 10% of future earnings. The lawsuit was dismissed with prejudice.
The players’ association does not regulate businesses such as BLA, and union head Tony Clark declined to comment on the company.
“The Major League Baseball Players Association is in a difficult position with respect to regulation of entities such as Big League Advance,” said Jay Reisinger, a lawyer who represents players. “While they have oversight authority with respect to agents, that is derived from the MLBPA granting certified agents certain rights that the MLBPA has under the CBA, specifically to negotiate individual player contracts. Entities such as Big League Advance are not granted any bargaining rights, and thus the MLBPA most likely doesn’t have any control over Big League Advance. The MLBPA should, and has, educated players about the dangers of deals with entities such as Big League Advance, but more education is certainly warranted.”
Scott Boras, baseball’s most high-profile agent, said he advises clients not to take this type of deal and tells them they are better off waiting until they reach the major leagues. The lowest big league salary is $570,500 this season, which comes to $3,067.20 per day when a player at the minimum is called up, an increase from the minimum of $700 weekly at Triple A, which was boosted from $502 weekly in 2019.
BLA does not break down its players from among baseball’s three entry paths: high school, college and international.
“The primary target is indigent and talented players from Latin America. Few if any top American talents who received large signing bonuses would ever consider the usurious terms,” Boras said.
“The idea of giving millions in lump sums to players is the justification of candy used to attract and compel players to give up huge percentages of their careers. That solely benefits BLA.”
Tatis agreed to a $700,000 bonus when he signed with the White Sox in 2015. His dad, Fernando Tatis, played in the big leagues from 1997-2010 and earned about $18 million, most from a four-year, $15 million deal with the Cardinals in 2000.
Tatis Jr. told The Athletic in 2018 he signed the BLA deal at first to afford a personal trainer, higher quality food and better housing.
Asked Monday whether he would recommend similar deals to other prospects, he responded: “I feel like that’s a very private decision from the player’s standpoint and from their family.”
Angels star Mike Trout, entering the third season of a 12-year, $426.5 million contract that is baseball’s largest deal, said he hasn’t given thought to whether the union should attempt to regulate this type of venture.
“I think if you put up numbers and you go out there, play hard and bring some joy in front of the game, I think everything will pay off in the end. And you don’t have to worry about that stuff. I’m sure it could hurt some players, it could. That’s just an educated guess,” he said, “I’m pretty sure that Tatis is pretty happy.”
BLA, based in Washington, D.C., Bethesda and Potomac, Maryland, says it is in its first season devising analytics for Duke basketball and consults for NBA teams. Its sister company, Jambos, provides analytics for sports betting.
Schwimer said the staff includes 35 people, all equity partners, including former prospects Rudy Guillen, David Ledbetter, Arlon Quiroz and Manny Ramirez Jr. Former Dodgers GM Paul DePodesta, known for his international baseball scouting and now chief strategy officer of the Browns, was involved when the company began.