Arizona Signs Yoan Lopez, But May Pay Very High Price

This morning, Ben Badler of Baseball America reported that the Diamondbacks have agreed to sign Cuban right-handed pitcher Yoan Lopez to a deal that includes an $8.25 million signing bonus. In comparison to the types of dollars we’ve seen for previous Cuban defectors, that number might seem somewhat small, but because of Lopez’s age and the rules surrounding international free agents younger than 22, Arizona has actually agreed to pay an extremely high price for the rights to sign the 21 year old hurler.

First, a quick refresher on the rules. Because MLB wanted international signings to somewhat mimic the way the amateur draft works, foreign players under the age of 22 are subject to bonus pool allocation limits. Like with the draft, these bonus pools are sliding scales based on prior season record, so teams that finished with the worst records get the most money to spend. Because the Diamondbacks finished with the worst record in baseball last year, they are going to receive the largest international bonus pool of any team for the signing period that begins on July 2nd.

However, by signing Lopez, they just punted the opportunity that comes with having the most money to spend, because the $8.25 million bonus that they gave Lopez pushed them way over their limit for the current signing period. The penalty for exceeding their pool allocation is a 100% tax on their overage and an inability to sign any player for more than $300,000 during either of the next two international signing periods, so while the Diamondbacks will be given a bonus pool in the range of $5 million for the upcoming July 2nd crop of talent, they won’t be able to spend it; there just aren’t enough legitimate prospects who will want to sign with Arizona for $300,000 apiece for them to use up their ~$5 million allocation.

And realistically, the 2016-2017 signing period will probably be similar. The Diamondbacks project as one of the worst teams in baseball for next season as well, so they’ll likely also have one of the larger bonus pools for the signing period that begins in 18 months, and again not be able to utilize it due to the restriction imposed by signing Yoan Lopez. Because of their poor Major League performances, the Diamondbacks were in a position to be able to make some significant international signings over the next two years, but they’ve decided that signing Lopez now will provide a better return than the chance to sign impact talents over the next two signing periods.

Now, there is some potential logic to this move, even beyond just the fact that Lopez might be really good. The signing restriction isn’t the same thing as the pool allocation being stripped away, as it is when a team forfeits a draft pick to sign a free agent; the Diamondbacks will still get the largest pool allocation for next year even after this signing. And because you can trade international bonus slots, Arizona will now have some pretty interesting trade chips to play with the next two summers. Any team who wants to sign a prospect for more than their own allocation, but without having to take the signing restriction policy, can now call up Dave Stewart and attempt to acquire some extra bonus money, and the Diamondbacks should be able to extract some prospects in return for the bonus money they can’t use.

And, there is some chance that MLB will just tear this whole system up in the next CBA, since it’s very clear the roadblocks the league tried to put in place to stop this kind of spending aren’t working. The current CBA expires on December 1, 2016, so if a new international system is put in place, it’s possible that the second year signing restriction could be eliminated, or at least converted into some other kind of penalty under whatever new system is adopted. Perhaps Tony LaRussa has some inside information on the likelihood of this system getting abolished before the second year restriction gets put in place, and so Arizona will take less of a hit for signing Lopez than currently appears.

And, of course, there’s always the possibility that Lopez just turns out to be a dominant #1 starter, which would make all of this a footnote; if he’s an elite talent, then these are easy prices to pay to acquire six years of team control. So, it’s not like this is a guaranteed disaster. Lopez could easily justify his acquisition cost if he turns into a good big league starter.

But don’t let the $8.25 million figure fool you; the Diamondbacks are paying far more than that to sign this kid. They had already previously announced five international free agent signings this period, with Badler reporting that two of the signings received $350,000 apiece, so they had already spent close to $1 million of their $2.3 million in allocated funds. By adding Lopez’s $8.25 million to the total, they’re looking at an overage tax of roughly $7 million, so the pure financial cost of signing him is really more like $15 million. And that’s without factoring in the opportunity cost of surrendering the largest pool allocation in next year’s international signing period, and potentially one of the largest bonus pools in the signing period after that as well.

This signing just made Lopez one of the most expensive pitching prospects in history. The signing bonus might look like peanuts in today’s baseball economy, but Lopez cost Arizona a lot more than just his $8 mlilion signing bonus.

Adding in a couple of comments from Kiley McDaniel, which he noted on Twitter.



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Dave is the Managing Editor of FanGraphs.


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glen
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glen
1 year 4 months ago

Or they also plan on going all in to sign Moncada and destroying their pool for next year anyway – might as well sign as many as they can

Joe
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Joe
1 year 4 months ago

Yup that’s the other angle I would think.

Sean
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Sean
1 year 4 months ago

Hasn’t the strategy the past few years for teams to go all-in during one IFA period then sit the next two out?

Brian
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Brian
1 year 4 months ago

That’s what I was thinking Glen. I was thinking this after the Angels signing of Baldoquin as well. Only one team can end up with Moncada though.

I’m pretty shocked teams are willing to drop this kind of cash on guys who are so unproven. These guys are no better than the amateurs available in the June draft, yet teams pay out the whazoo just because the penalties for INT guys aren’t as deflating as the June penalties.

Catoblepas
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Catoblepas
1 year 4 months ago

What you’re seeing with the seemingly-exorbitant sums of money being dropped on international amateurs is the effects of the caps on the draft market. Teams have very limited avenues to trading cash for talent, and so teams that have cash to spend on long-term assets will drive up prices in the avenues that do exist.

Bobby Ayala
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Member
1 year 4 months ago

Wait, I thought the international bonus pools don’t matter?

http://www.fangraphs.com/blogs/the-international-bonus-pools-dont-matter/

Alice Cooper
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Alice Cooper
1 year 4 months ago

“Perhaps Tony LaRussa has some inside information on the likelihood of this system getting abolished…”

That would be a VERY Tony LaRussa thing to do….

Schuxu
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Schuxu
1 year 4 months ago

What happens with the tax penalty money? Does it go into some kind of pool to be shared by all teams or does it go into some international projects?

Vlad
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Vlad
1 year 4 months ago

To justify this deal and the roughly $15M total investment, Lopez needs to be in the Majors within 2 years and be at least a low end #2.
This seems like a desperate move by the DBacks to be relevant quickly, rather than reload for a couple of years.

Sean
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Sean
1 year 4 months ago

How do you justify “2 years” or “low-end #2”? Seems like your pulling things out of your rear quarters.

Vlad
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Vlad
1 year 4 months ago

He’s 21 years old, essentially a college junior in the U.S. equivalent of the draft, and talent-wise seems to be like a mid to late first round pick.
Yet his bonus indicates a Top 5 in the first round level. That doesn’t even factor in the tax overage. For comparison, prior to the bonus changes in the draft, Gerrit Cole’s bonus was $8M as a 1-1.

If Lopez debuts as a 23 year old, the team would control his rights through age 28 — his prime years. If he takes more than 2 years and debuts at say age 25, then he’s losing value from their initial investment.

If you are expending $15M, a team is hoping they’re getting more than a reliever or back-end #5 level guy. Hence the #2 designation.

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