Why it made sense for Stroman and Gausman to accept their QOs
This offseason, six pending free agents were issued qualifying offers, but only two accepted them: Marcus Stroman, with the Mets, and Kevin Gausman, with the Giants. From a valuation perspective, it makes sense to us that these were the only two, because they were the only borderline cases (the other four profiled well above the $18.9M salary level, which means they would have been leaving money on the table had they accepted).
Based on our modeling, we project Stroman’s adjusted field value (AFV) at $18.5M for 2021. So the QO is a small overpay for him, which is why, we think, he accepted it. He’s coming off a year where he opted out, which means he hasn’t pitched since 2019. As of this writing, Steamer projects him for 2.7 fWAR, which is the same as our blended model number. However, Stroman will be 30 in 2021 and has had some injury concerns in the past, particularly with his shoulder, which would give any acquiring team some pause. After adjusting down for that, our valuation is just below the QO price.
Looking ahead, based on current projections, Stroman figures to decline as he ages into his 30s. At the moment, his AFVs for 2022 and beyond look like this: $16M, $13M, $10M, $8M. Keep in mind that if he had declined the QO, any team signing him would also lose a draft pick (which we estimate at $2.2M at least) and would also factor in contract risk. In other words, he was probably looking at potential offers of, say, 2/30 or 3/42 (the more years you add, the more you also have to add in contract risk), which would have lowered his AAV to $15M and $14M, respectively. It’s possible that those offers would be even lower, though, given the projected losses almost every team is facing due to the pandemic. Taking the QO this year gives him both a higher AAV and an opportunity to outperform his projections, which would in turn increase his chances of a higher AAV in 2022 and beyond.
From the Mets’ perspective, issuing the QO made risk/reward sense. Let’s say the chances of him accepting were 50/50: if he accepts, they get a starter worth $18.5M, or $-0.4M surplus value. If he declines, they get a draft pick, which, at minimum, would have been a 40-grade prospect worth around $2.2M. So the net present value of that was: a 50% chance of -0.4 plus a 50% chance of 2.2, which nets out to a positive $1.8M.
As a side note, it’s interesting that Stroman was offered the QO by the outgoing GM and his assistants, all of whom were fired when Steven Cohen closed his purchase of the deal, in the middle of the timeframe during which Stroman needed to make his decision. Cohen, for his part, seems happy to have Stroman in the fold, and as the richest owner in the sport, I’m sure he doesn’t care about the valuation rounding error, so all’s well that ends well.
In Gausman’s case, our model projects his AFV at $20.7M, which means there is a small amount of projected surplus (1.8M) after he accepted the QO. It’s small enough to be a rounding error, though, within the normal levels of variance (a 20% variance on his AFV would give him a range of $16M-$24M, but given the aforementioned concerns about team budgets, it likely skews lower).
Gausman is also turning 30 and has a spottier track record. Yes, he had his best year ever in 2020 — his lowest-ever FIP (3.09), xFIP (3.06) and xwOBA (.278) — which is why the Giants made the offer (also because they really need starting pitchers). But, similar to Stroman, he figures to decline in his 30s, which means any potential multi-year offers would have lower AAVs with each added year, in addition to the applied cost of the draft pick. From Gausman’s perspective, accepting the QO is a bird-in-hand move that guarantees him a salary close to his water level; and if he turns in another good year, he’ll be a free agent again without the burden of a QO attached and facing a market next winter when, in all likelihood, teams will have a bit more budget room than they do now.