$700m Shohei Ohtani Contract Break Down?
Anyone want to break down this contract? There are a lot of moving parts here, so I'm not sure what the PV of the deal is. I've seen that the contract without deferrals would be somewhere around $480m. Accurate? That's honestly not that crazy. Juan Soto is likely to get that next year. Plus, I know a VP at Jefferies who said his total comp is close to that.
10 more years of the biden admin and that will be pocket change.
come on man!
Biden alive in 10 years? I think he goes the way of a certain Martha's Vineyard chef in no less than 5.
It's fairly obvious he only got $700M because he was willing to defer most of it. Not deferred, probably talking $450M-$500M, especially considering it's only a 10 year, compared to the other $400M+ contracts like Trout being 12-13 years. Closest comparable is Judge at 9 yr, $360M, for avg of $40M/yr. For Ohtani to get $70M/yr, even given how special of a player he is, has to be a unique contract structuring. Consider a more down-to-Earth figure for Ohtani, 450 over 10, which lines up more with other comparable large contracts. $450M compounded at 5% for 10 years is $733M. Hence the large premium for deferring $680M. You also have to consider that this guy is bringing in tens of millions from endorsements every year, which is only gonna increase by being on the Dodgers, and you can see he's not exactly starving with his measly $20M over 10 yrs undeferred. All things considered, it makes sense
I find this contract to be interesting. I am assuming it has some kind of post contract berevement guaranty clause because if it doesn't that leave a very large incentive to cause a car crash.
The one thing the other posters haven’t mentioned is that there may be some win-win tax arbitrage here in addition to the time value of money dynamics.
Ohtani takes very little money up front in California and has the ability to establish himself elsewhere in the interim to save on taxes. Reducing tax leakage is a win-win for the negotiating parties.
Isn't there some regulatory risk with this tax arb?
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