Gunnar Hoglund’s $1.34 Million Dollar Gamble

On Friday, the signing deadline for draft picks from the June draft was at 6 p.m. Competitive Balance pick of the Pirates, Gunnar Hoglund, decided to not to sign and go to college at Ole Miss. In the process, Hoglund presumably turned down at least the slot value of $1,967,900 assigned to the 36th overall pick.

I don’t know Gunnar Hoglund. I’ve never seen him pitch outside of a few highlight clips on MLB.com and Youtube. He was regarded as a projectable righty (aren’t we all?) with a fastball that ranged from 89-95, a fringy changeup, and the makings of a breaking ball. At 6′-4″/210, he had the body of a major league pitcher, but there was a lot of dreaming associated with Hoglund.

At hand though, is Hoglund’s decision to forego that $1,967,900 signing bonus. Hoglund joined three other 1st round picks this year to not sign, a number not seen before. Every year, every team drafts high school guys in the later rounds and hope to either lure them to sign with them for around $125,000 (maximum this year a team could offer after the 10th round without affecting their bonus pool) or as back-up plans if someone earlier doesn’t sign. Now, I’m not going to look down on someone getting a $125,000 bonus for signing their name on a piece of paper, but once you factor in taxes and agent fees that gets down to $65,000 in a hurry.

In contrast, let’s break down exactly what Hoglund gave up here. Using this online calculator, Hoglund (a Florida native in a state that has no local/state income taxes) could be expected to lose $741,779 in taxes, taking his bonus down to $1,226,121. Now let’s assume a 5% agent fee on the original $1,967,900 for an amount of $98,395. That would leave Hoglund with white meat of $1,127,726.

If Hoglund didn’t decide to go hog wild and blow all this money, he could drop the whole amount into a series of retirement vehicles. Assuming 6% interest, over the next 3 years, that amount would swell to $1,343,139. So since Hoglund is now not eligible to be drafted until 2021, that’s the rough amount of money that he is gambling he can beat next time he is drafted.

I like that Hoglund is betting on himself. Maybe he feels he isn’t mature enough at this point in his life to handle life in the minors on his own. Maybe he legitimately thinks he can be drafted even higher in 2021. But…man. That’s a lot of money to turn down. That amount is what working stiffs like myself are hoping they can accrue by the time they hit 60 or 65 so they can retire comfortably. He turned that down at 18.

I’m not here to cast aspersions on Hoglund. This is America, not North Korea, so he’s free to make his own choices. But the track record of players who didn’t sign in the first round (including the supplemental and competitive balance picks) over the past 10 years, then beating that amount in a subsequent draft, is not great.

• Drew Rasmussen, 2017 (Rays) — college junior didn’t sign for $2.1M, had Tommy John after returning to Oregon State, Brewers drafted him in 6th round in 2018 and signed for $135,000.
• Nick Lodolo, 2016 (Pirates) — Pirates running a trend here. Lodolo turned down 41st pick slot money of $1.57M and went to TCU. Eligible in 2019 for the draft.
• Kyle Funkhouser, 2015 (Dodgers) — college junior turned down 35th overall pick money of $1.75M, signed in 2016 with the Tigers in 4th round for $750,000.
• Brady Aiken, 2014 (Astros) — OK, major asterisk here. Aiken was a high school pitcher drafted 1-1, but the Astros found an abnormality in a ligament in his elbow and offered him a cut-rate deal of $3.15M (down from the $6.5M they agreed upon in principle). He declined and went to prep school, got drafted 17th overall in 2015 by the Indians and signed for $2.5M, and sure enough needed elbow surgery. He has had very lackluster numbers in his minor league career.
• Phil Bickford, 2013 (Blue Jays) — Bickford turned down $2.9M from the Jays, got drafted by the Giants 18th overall in 2015 and signed for $2.33M. He’s already been suspended once for marijuana and been traded to the Brewers in the Will Smith deal. He’s laboring in High A this year.
• Matt Krook, 2013 (Marlins) — Krook was drafted out of high school and selected with the 35th overall pick, but the pitcher did not sign for around $1.6M. He was drafted in the 4th round by the Giants in 2016 and signed for $500,000. He was traded to the Rays this past offseason in the Evan Longoria deal and is plying his trade in Double-A this year.
• Mark Appel, 2012 (Pirates) — Ah…old friend, Mark Appel. After expecting to go 1-1 in 2012, the Stanford pitcher was insulted by the $3.8M the Pirates offered so he turned them down and went back for his senior year. He got his wish in 2013 when the Astros drafted him 1-1 and signed for $6.35M, but he was awful in the minors, got traded to the Phillies, and when his heart was no longer in it, he retired in February of this year without ever sniffing the Majors. He’s one of the largest 1-1 busts in the draft’s history.
• Tyler Beede, 2011 (Blue Jays) — Beede was drafted 21st overall out of high school, but the Jays couldn’t sign the pitcher after offering $2.5M. He went to Vanderbilt and the Giants selected him 14th overall in 2014 and signed him for $2.6M. Beede has had terrible numbers in AAA, but did get two starts in San Fran this year.
• Brett Austin, 2011 (Padres) — The Friars drafted the high school catcher 54th overall but couldn’t sign him for a reported $1.6M. The White Sox signed him in 2014 after drafting him in the 4th round for $450,000. His bat is anemic and he’ll probably never see the Majors aside from maybe a cup of coffee.
• Barret Loux, 2010 (Diamondbacks) — Loux is another injury-related non-signing. After being drafted 6th overall, the D-backs became concerned with the medicals of the Texas A&M junior. After not signing, MLB declared him a free agent and he signed with the Rangers for $312,000, far below the rumored $2M he agreed to with the D-backs pre-draft. He pitched a few seasons in the minors, but hasn’t pitched in affiliated ball since 2015.
• Karsten Whitson, 2010 (Padres) — Whitson has quite a tale to tell. After the high school pitcher was drafted 9th overall, he turned down $2.1M from the Padres and went to Florida. In the 2013 draft, the Nationals drafted him in the 37th round, but he turned that down predictably. After his senior season, the Red Sox selected him in the 2014 draft in the 11th round and he signed for $100,000. He pitched a grand total of 7 innings in 2014 and has two shoulder surgeries without pitching an inning since then.
• Dylan Covey, 2010 (Brewers) — Covey didn’t sign for $1.6M with the Brewers, but it was for an issue that on the surface made sense. Covey was discovered to have diabetes and he decided he needed some time to figure out how to handle that. The A’s drafted him in 2013 in the 4th round, which is apparently the 1st round pick-redraft round, and signed him for $370,000. Covey was traded in 2016 to the White Sox and has made the Majors, where he’s been pretty terrible as a starter, including this year.
• Matt Purke, 2009 (Rangers) — The Rangers couldn’t get the high school pitcher signed for a reported $6M bonus after drafting him 9th overall and he went to TCU. The Nats grabbed him in the 3rd round of the 2011 draft and signed him for $2.75M. He’s been moved to the White Sox and is now with the Mets. He’s been a good reliever in Triple A, but has only had a few innings in the Majors to date.
• LeVon Washington, 2009 (Rays) — The Rays couldn’t get the 30th overall pick to sign on the dotted line for $1.1M out of high school. He went to a junior college and signed with the Indians in the 2nd round for $1.2M in 2010. He never got past High A and has been out of affiliated ball since 2015.
• James Paxton, 2009 (Blue Jays) — The Jays couldn’t sign the Canadian-born Paxton for $873,000 after drafting him 37th overall as a college junior out of Kentucky. A huge bruhaha erupted between the Jays, Scott Boras, and the NCAA. The Mariners scooped him up in the 2010 draft in the 4th round and signed him for $942,500. Paxton has had to deal with injuries throughout his career, but is having a breakout season this year for the Mariners, including a no-hitter.
• Aaron Crow, 2008 (Nationals) — The Nats selected Crow 8th overall in 2008, but couldn’t entice him to sign for a reported $3.5M. He went the Independent ball route for a year, then signed with the Royals in 2009 for $1.5M after being selected 12th overall.
• Gerrit Cole, 2008 (Yankees) — The gold standard for Hoglund. After his boyhood favorite team selected Cole 28th overall, he spurned them and their $4M offer for UCLA. Cole had a great career and the Pirates selected him 1st overall in 2011 and gave him an $8M bonus.

So in the past 10 drafts, 17 players selected in the first round have not signed with their teams. Of those 17, only 5 signed for more money in a subsequent draft, with the jury still out on Lodolo. That’s a bleak set of odds for Gunnar Hoglund to overcome. And then there’s the most cautionary tale of them all, Matt Harrington, who has such a terrible story of draft miscues and bad advice that I’m just going to link it for your own reading.

Sure, he can take out insurance on his arm in the event of an injury, but there’s not insurance (at least without a staggering premium) to ensure that he can better the $1.34M that he potentially lost by not signing on Friday.

I’m reminded of when Evan Longoria signed his ultra team-friendly extension with the Rays back in 2008 just a few weeks after being in the Majors. He said that Eric Hinske, noted financial adviser apparently, told him “Don’t pass up the chance to make your first fortune.” Keep in mind that Longoria already had a $3M signing bonus in the bank, of course, but you get the point.

I wish Hoglund well. I hope that his gamble pays off for him in 2021. But the odds say that it won’t.