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May 10, 2013

Dissecting the Draft

Due Diligence

by Nick J. Faleris

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With our first-round targets broken out into three tiers, per our last installment of the Dissecting the Draft series, we are ready to start breaking down our decision-making tree, starting with Tier One. As a recap, here is where our tiers currently stand for our first pick in the draft (seventh overall), in each case in alphabetical order:

Tier One
1. Mark Appel, RHP, Stanford University | Scouting Report
2. Clint Frazier, OF, Loganville HS (Loganville, GA) | Scouting Report
3. Jonathan Gray, RHP, Oklahoma University | Scouting Report

Tier Two
1. Trey Ball, LHP/OF, New Castle HS (New Castle, IN)
2. Kris Bryant, OF/3B, University of San Diego
3. JP Crawford, SS, Lakewood HS (Lakewood, CA)
4. Jon Denney, C, Yukon HS (Yukon, OK)
5. Sean Manaea, LHP, Indiana St. Univ.
6. Reese McGuire, C, Kentwood HS (Covington, WA)
7. Braden Shipley, RHP, University of Nevada
8. Dominic Smith, 1B/OF, Serra HS (Los Angeles, CA)
9. Ryne Stanek, RHP, University of Arkansas
10. Kohl Stewart, RHP, St. Pius X (Houston, TX)

Tier Three
1. Ryan Boldt, OF, Red Wing HS (Red Wing, MN)

Moving forward, we’ll start pieces in this series off with a recap of our tiers as they currently stand, which will include ranking by preference as we approach draft day. Additionally, we’ll eventually have full reports on all of these candidates linked in the summary section.

Planning for the Unlikely
As a reminder, the baseline for our Tier One candidates is talent beyond what we would generally expect to have available at our current drafting slot. The deeper the draft (at the particular slot being examined), the more likely you are to see a Tier One candidate on the board when your slot comes up. In the case of the seventh overall pack in this 2013 draft class, however, our breaking down and examining of the three Tier One candidates is a matter of belt and suspenders, with it being likely all three will be selected before they reach us, and an almost certainty that the pitchers will not escape the top three picks.

The majority of the heavy prep work will center on Tier Two candidates, as we more fully examine below and in our next two pieces. Still, it is incumbent on decision-makers to ensure that due diligence is performed on all potential selections, and particularly with regards to talents whose availability at slot would be considered a windfall. Our Tier One list spans just three players, and our slot is seven players in. Minimal prep work leading up to the draft will afford us the luxury of not scrambling to make alternative plans should one of these players drop to us unexpectedly.

Anticipating Ripples: Three Options
When any Tier One candidate falls unexpectedly to a draft slot lower than his talent would otherwise dictate, selection of that candidate will result in ripples in an organization’s later selections—such ripples varying in scale depending on the particulars of the player’s profile. These ripples can generally be broken down into three categories: (1) player will require significantly more money than currently tied to our drafting slot, (2) player will require slightly more money than currently tied to our drafting slot, or (3) player should be signable for around the money currently tied to our drafting slot.

The largest ripples in later draft selections will come when the Tier One player dropping to us will require a significantly higher bonus than is currently allotted to our draft slot. For this reason, it is of the utmost importance to have as firm an understanding as possible as to what if will take (ballpark) to ink your Tier One players should they fall to you. While it is unrealistic (and technically against draft rules) to expect to obtain specific bonus amounts from would-be draftees, we need to have some idea as to whether selecting the player will require an additional $500,000, $1 million, or more than our current slot allows.

If a player falls into this category, the optimal approach to managing ripples further down the draft is two parts. First, the late single-digit rounds should be utilized to bank extra money (generally by selecting players that will be willing to sign for nominal amounts, so as to free up as much of their slot allotment as possible). In certain instances, it may be necessary to select a third- or fourth-round player one round early in order to save some additional money there. Obviously, this will take its toll on the strength of your draft class as a whole, making the quality of your scouting and player valuation even more important.

Finally, you will want a back-up plan or three, preferably starting in the 11th round, so that should you fail to sign your first-rounder, the money you have otherwise saved can be put toward something of value. As a reminder, if you fail to sign your first-round pick, you do not have access to that allotted money. Rather, we would be spending the money saved in other rounds on our “back-up plans.”

The second Tier One ripple comes when the Tier One player dropping to us will require slightly higher bonus money than is currently allotted to our draft slot. As you might expect, these ripples are smaller than those in the scenario above, and can generally be limited to two or three of your final picks in the top ten rounds being utilized to free up cash (signing a player for a nominal amount in order to repurpose their slot allotment). This strategy should also be paired with at least one significant back-up plan post round ten, and still leaves room, generally, for one more aggressive play in the top five rounds, so long as you are willing to leverage your lower single-digit-round picks to continue to free up additional money. Again, the quality of your player evaluations is key, as you will need to excel in finding value while targeting players generally expected to come off the board later than you select them.

The third and final category of ripples is caused by selection of a Tier One candidate that could reasonably be expected to sign for around what our slot allotment affords us. This will only happen if the Tier One candidate is someone you have rated more highly than the teams picking ahead of you (such that the player and his advisor have an industry valuation set somewhere around your slot amount), or if the player simply has no interest in continuing scholastic ball and is dead set on turning pro. In either case, this is the ideal situation, where we are able to land one of our preferred picks without having to sacrifice flexibility in actions later in the draft. So, what sort of ripples do we expect to run through our draft if our Tier One candidates are available to us?

Setting Our Options and Expectations
Before delving into this, I want to briefly state that the analysis in this section is not based on information specific to Appel, Gray, or Frazier. As a general matter, my preference is not to discuss signability of players or requested bonus amounts, and most certainly not this far ahead of draft day. More than anything, this is out of respect for the process the players and organizations have to navigate; both sides have reasons for wanting certain numbers private or public. My preference is to steer clear of that aspect of negotiations, so the analysis in this section is based on a general examination of the player profile types of each of Gray, Appel, and Frazier, and how those profiles would generally be viewed as far as their perceived leverage at negotiation time.

Appel is a senior sign turning 21 this July, and he should generally be interested in signing for top-ten money. More importantly, he has enjoyed a highly productive senior year and has positioned himself to come off the board high enough that offered money should not be an issue. His leverage in negotiations will stem from the fact that the draft is fairly light on elite talent; Appel represents one of just a few players that would generally be able to demand top three overall money in a given draft class. That said, he is ready to start his pro career from a developmental standpoint and could be in the majors late this year or, more likely, early next year. There is little reason to put off the start to his career at this point, so we would view him as either a moderate ripple or light ripple risk—meaning were he to fall to us for some reason, I would expect we can sign him for around slot allotment or without going significantly over our slot allotment.

As a junior, Gray has a little more leverage than does Appel in that he has another year of eligibility at Oklahoma. Additionally, as is the case with Appel, Gray is one of a very small group of players that should almost universally be considered the elite of the draft class. The organization’s leverage will come from Gray’s limited track record and the fact that he should have a strong incentive to start his career now, as make the bigs as early as next summer, while holding out and re-entering the draft would likely push back his debut to late 2014 at the earliest. Finally, it’s worth noting that while a lot can change between now and next June, the 2014 class looks to be deeper up top, meaning Gray could have stiffer competition for the top couple spots in the draft class. As is the case with Appel, Gray should be viewed as a moderate ripple or light ripple risk, notwithstanding any changes in his profile between now and draft day.

Frazier has the most leverage of our Tier One triumvirate, based on his alternative options to signing (namely, heading to college—be it through honoring his commitment to Georgia or enrolling in a junior college and re-entering the draft next year). There is room for significant improvement in his signing bonus if Frazier can head to school and emerge as a candidate for first overall come June 2016, but by starting his pro career now, he would give himself the chance to be breaking into the majors that June, rather than waiting to start his minor-league career.

There are also some questions organizations could have relating to his profile type—namely, his lack of physical projection and the fact some teams may question whether he is a center fielder or corner outfielder, long-term. All factors considered, and notwithstanding actual bonus figures that may be leaked at a later date, Frazier should be viewed as a moderate ripple risk, with a fair chance at signing at slot allotment.

Ranking Our Options and Game Planning
Identifying the ripple risks, we now move on to ranking our options. Our Tier One players have links next to their names at the top of this piece, leading to their full scouting reports. Here is how the pure grades come out (MLB ETA in parenthesis):

1. Jonathan Gray – 58/65 (2014)
2. Mark Appel – 61/63 (2014)
3. Clint Frazier – 59/61 (2016)

The two arms provide us with the highest “overall future potential,” or OFP, as well as the shortest developmental investment required. Those benefits, however, come with the additional risk of injury inherent with arms, as opposed to position players. Further, because Frazier is further from fully baked, he stands a better chance of outdistancing his OFP (likewise carrying a greater risk of failure due to his further proximity from major-league readiness).

With OFP as our strongest factor, we next look at the comparative ripples these selections would have on the rest of our picks. As noted above, all three selections figure to have moderate to negligible risk of requiring heavy adjustments later in the draft, making this aspect of our analysis essentially a wash. Further simplifying the matter is the fact that our Tier One only runs three players deep, while our slot will see six players selected before our pick.

Appel and Gray are the clear top arms in the class and, barring injury, are a lock to be off the board given the other options available to the six teams drafting ahead. Further strengthening their cause is the fact that both measure up well with $4 million-plus arms selected in recent drafts, making it unlikely that teams in the top four picks would pass on them. In short, asking price isn’t going to push them down the board to seventh overall.

Frazier has a fair shot of being available when our slot rolls over. Some organizations will shy away from Frazier due to their preference to select high school players with more physical projection in their game, swing-and-miss concerns (which would limit the utility of his big-time power tool), and some may not be sold on him as a center fielder. He grades out for us as a top-five guy due to adjusted OFP, which takes into account some intangibles that bump up the overall profile, but by straight tool evaluation, he could be closer to a top-15 talent. Generally speaking, Frazier could come off the board anywhere in the top half of the first round, all things equal, which is an ideal spot for us so long as he is intent on signing and starting his career. He is our best opportunity to grab a Tier One talent, and the only such talent on our board that seems like a possibility to drop to us at seventh overall.

In other situations, we might consider certain other outside variables, including how our first-round pick might pair with the likely available talents in the second and third rounds, as well as organization specific needs, when looking to differentiate between three similarly valued players. Were we selecting first overall, we would be forced to delve deeper into the Appel/Gray comparison (and perhaps we’ll take a look at this in any event as a one-off draft piece later this month), but considering the chances of us having the opportunity to draft either is just a hair over nil, we will not invest that time and effort at this point. We will simply opt for the slightly higher upside of Gray over the slightly higher probability of Appel, so as to add structure to our Tier. But essentially we have a 1a and 1b in Gray and Appel, with Frazier rounding out Tier One:

1. Jonathan Gray
2. Mark Appel
3. Clint Frazier

Looking Ahead
Our next two pieces will examine Tier Two, including a ranking of the players in the tier in much the same way we looked at Appel, Gray, and Frazier. As most of these players will be available when we select, we will go into greater detail in differentiating the talents and figuring out which selections will provide us with the best opportunity to maximize the overall talent of our draft class. The individual player scouting reports will be rolling out for our Tier Two players between now and the publishing of the next two pieces, so be sure to check those out as well.

Thanks, as always, for checking in. I look forward to digging into Tier Two with you next time around.

Nick J. Faleris is a practicing structured finance attorney and Sports Industry team member in the Milwaukee office of Foley & Lardner LLP. The views he expresses in Baseball Prospectus are his own, and not necessarily those of the law firm.

Nick J. Faleris is an author of Baseball Prospectus. 
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