Mythbusters: Acquiring a 1 year rental player like Justin Upton improves the team’s chances at signing them to an extension

After the exciting acquisition of Matt Kemp, the rumormongers have moved onto pushing the Justin Upton to the Padres narrative. This is a great move if the team is pushing to be in contention in 2015, but not if they are looking for long term improvement. After all, Justin Upton (and Yoenis Cespedes, who was previously rumored) is a free agent after the 2015 season. But wait, I read on the Tweeter, the team gets an EXCLUSIVE window to negotiate an extension with Upton if they acquire his rights. Great, right?! In fact, you hear this every trade deadline, that a rental player may give the acquiring team a better chance at extending them before they hit free agency. But is this mantra really true? I decided to dig into the recent extensions and find out.

To kick off this analysis, I decided to eliminate all extensions with a total value below $30 million. Justin Upton is a marquee free agent, which I believe has different dynamics than your average 2/$4 million extension candidate. Upton’s free agent value likely is in the 9 figures, and he may be at the very least, a top 3 free agent next offseason. So in the last 5 years, these are the extensions that were granted for over 30 million dollars to players acquired as rentals (with 1 year or less of time under contract remaining):

Adrian Gonzalez – 7 yrs/$154 million – April 2011

Roy Halladay – 3 yrs/$60 million – December 2009 (agreed to in conjunction with trade from Blue Jays) – December 2009

Martin Prado – 4 yrs/$40 million – January 2013

Carlos Quentin – 3 yrs/$30 million – July 2012

And….. that’s it. 4 players in five years have been extended by their clubs after being acquired as short term rentals. So think back to all of those short term rentals that moved at the trade deadlines. The Jon Lester’s, the Chase Headley’s, the Cliff Lee’s, the Zack Greinke’s, the Carlos Beltran’s, their acquiring teams were unable to use their exclusive negotiating window to retain these talents.

There are a few reasons why the exclusive negotiating window is a myth. First, when dealing with top flight free agents, there is a lot of money at stake, and there are a lot of hands in the pockets of the player signing the huge contract. An agent is monetarily incentivized to maximize their client’s earnings, as they receive a percentage. A free agent like Justin Upton is virtually guaranteed a huge payday after 2015, and monetarily, there is little reason to sign a below market extension without testing the free agent market first. In Upton’s case, assuming the Padres acquired him, there would be draft pick compensation involved for the signing team, but history has shown that this compensation has not deterred teams from signing the cream of the crop free agents, nor has it depressed their open market value (again, this is for top flight free agents).

The main motivation for a player to sign a long term extension is risk mitigation. In most cases, this risk is an injury risk, but it could also include performance risk. So for example, if the Padres acquired Upton and he took a dump on the 2015 season, theoretically, his 2015 free agent value would be depressed. Had he accepted a Padres extension, he would have mitigated that risk at the expense of a below market extension. Of course, the Padres would now have a player under-performing his huge extension, but that’s beside the point. Historically though, the top free agents, as the aforementioned data showed, have foregone that risk mitigation, tested the market, and in almost every case, reaped a larger contract than they would have had had they signed an extension pre-free agency.

As a brief aside, Justin Upton is represented by Reynolds Management. Looking at their client list, they have exactly one client that has signed an extension, period. Howie Kendrick extended 10 months before free agency with the Angels in 2012, but he was not a rental, having played with the Angels for his entire career.
It is alluring to think that the Padres could acquire Justin Upton, show him the weather here in San Diego, and hope that he’d forego 10’s of millions of dollars to sign an extension here, but really, what motivation would he have to do so before at least testing the free agency market. From the player’s point of view, he retains the freedom to test the market, and if the Padres were to offer a market competitive offer in free agency, come back to the team. If I were his agent, I would most certainly be recommending that option to maximize his value (and my agent fee). And don’t for a second think that his agent isn’t in his ear letting him know that, let alone the player’s union that is incentivized to fight for the largest contracts possible for its members.

The data shows that in almost every case, a rental player will not be signed to an extension by their acquiring team. If the Padres trade for Upton, it would need to be on the merits of his 2015 performance expectations in addition to the draft pick compensation should he leave in free agency. There is virtually no value built into his value in the form of exclusive negotiation window for an extension. He would be a 1 year rental and nothing more. If the team is looking to win the 2015 World Series (they have more than an Upton acquisition needed to get there), a rental makes perfect sense. If the plan is to acquire Kemp and Upton and hope for a World Series with no further major moves, it may not make sense to trade the farm for 1 year of Upton.

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One response to “Mythbusters: Acquiring a 1 year rental player like Justin Upton improves the team’s chances at signing them to an extension

  1. Pingback: Podcast 10: Upton, Norris, and Middlebrooks, oh my! | Gwynntelligence·

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