This is not a post about the Miami Heat but rather about Tristan Thompson and the Cleveland Cavaliers. I have quickly drafted it in response to questions I have been receiving.
Update (10/2/15): Tristan Thompson did not accept his one-year, $6.8 million qualifying offer for the 2015-16 season by Thursday’s 11:59 pm deadline. It has now expired. With its expiration, Thompson has undoubtedly lost some leverage.
Thompson remains a restricted free agent, but he can no longer unilaterally accept a one-year salary and become an unrestricted free agent next summer. Instead, he now has two primary options.
First, he can still sign an offer sheet with another team at any point until March 1, which the Cavaliers could match by exercising their right of first refusal. Only the Philadelphia 76ers and Portland Trail Blazers can create enough room to make Thompson a substantial offer at this point, which must be between two and four years in length. The Sixers can create up to $14.7 million of room, which would equate to $30.1 million over two years, $46.2 million over three years, or $62.9 million over four years. The Blazers could create room for the full $16.4 million maximum, which would equate to $33.6 million over two years, $51.4 million over three years, or $70.1 million over four years. But neither team currently appears interested in making such an offer.
Second, he can still sign a contract with the Cavaliers at any point until the end of the regular season. It could be in the form of a five-year contract that provides long-term guaranteed security, an unlikely one-year contract that allows the sides to table discussions over a long-term deal until next summer, or anything in between. But Cleveland now seemingly has little reason to increase their current bid, which starts at $13.9 million and would reach $80.0 million over five years. Unless the Sixers or Blazers step up with a substantial offer, Cleveland can essentially force Thompson accept it or cause him sit out the entire season and remain a restricted free agent subject to Cavalier control next season. Thompson had been asking for a max contract of either three years in length, paying out $52.9 million, or five years in length, paying out $94.3 million.
Despite their increased leverage, the Cavaliers aren’t likely to substantially decrease their $80.0 million bid either. Beyond the less tangible reasons – such as a spirit of fair dealing, and the fact that Thompson shares an agent with upcoming free agent LeBron James – there are economic factors at play. At some point, Thompson would be better served sitting out the season (perhaps playing overseas) and simply trying his luck as a restricted free agent next summer, when more than half the league will have the cap space with which to present him a substantial offer sheet. At the league’s projected $89.0 million 2016-17 salary cap, such an offer sheet could start at up to $20.9 million and reach $89.1 million over four years if they deem it a prudent investment. Such a contract, even when added to as little as nothing this year, could possibly be worth nearly as much if not more over the next five years than the Cavaliers’ own $80.0 million offer. And given the Cavaliers’ repeater tax concerns in the outer years, matching such a contract could wind up being far more costly overall.
While it is unclear as to whether it will cost their client, it would appear that Thompson’s representatives overplayed their hand in their negotiations with the Cavaliers. Not only is Thompson now beholden to the Cavaliers, but they have been exposed as possibly lying during the negotiations. Rich Paul, Thompson’s agent, said that he had at least three teams lined up and waiting to offer Thompson a maximum contract if he is available as an unrestricted free agent in 2016. If that were true, it seems likely that Thompson would have exercised his qualifying offer.
For a description of why Paul made such a comment, and for a full review of the economics involved in the negotiations, please read the post below.
The ongoing gap between what the Cleveland Cavaliers have offered restricted free agent Tristan Thompson and what his camp is seeking has made for spectacular theater over the past several months.
Thompson and the Cavaliers had initially reached an agreement early in free agency that was believed to have been for five years and $80 million. The problem for Thompson was that, as free agency moved along, several of his perceived peers got more money (some on shorter deals but all with higher first-year salaries; his $80 million deal would start at $13.9 million).
After seeing forward Draymond Green sign a five-year, $82 million contract (starting at $14.3 million) with the Golden State Warriors and center Enes Kanter sign a four-year, $70 million contract (starting at the $16.4 million maximum) with the Oklahoma City Thunder (matching an offer sheet from the Portland Trail Blazers), Thompson sought out more.
Thompson backed away from the $80 million figure, and instead asked the Cavaliers to increase their offer to a five-year, $94 million maximum contract. That posed a significant problem for the Cavaliers, given the underlying financial implications. Read more…