Fernando Tatis Jr. signed a massive 14-year, $340 million contract on Wednesday with the San Diego Padres, which made it the third biggest contract in baseball history.
Aside from paying California taxes, not all of that $340 million will go to Tatis.
When he was just a teenager playing Single-A baseball, he signed a contract with Big League Advance, a firm that invests in young athletes. According to Big League Advance, the firm spread out $26 million among 77 minor league baseball players in 2017, and that included the Padres superstar. Players like Tatis then agree to give up anywhere between 1% and 12% of future MLB earnings.
That has now came back to bite him in the butt as Tatis’s deal was for 8% of his earnings, which would mean $27.2 million of this contract will go to Big League Advance.
“When we signed him he wasn’t considered a Top 40 prospect,” Big League Advance CEO Michael Schwimer said about Tatis. “At the time, talking to investors, the amount of money we were offering him was a sizable portion of our bankroll. But we trusted the model.”
According to Jared Diamond of the Wall Street Journal, the company uses a proprietary algorithm to project player performance and future earnings to determine the set amount it will loan a player.
“For instance, if Big League Advance offers a minor-leaguer $100,000 up front for 1% of his earnings, that player can then decide to accept $500,000 in exchange for 5% or $1 million for 10%,” Diamond wrote.
Just 22 years old, Tatis has established himself as arguably the best young player in MLB.