Summary (for the tl;dr crowd)
By comparing Soler with a group of similar players of similar talent level (high school outfielders picked in the top 10 overall), I estimate that objectively Soler is worth a bonus of $20-$25 million. Given the alternative uses of the cash due to future restrictions on draft and international spending (the markets with highest expected expected return on investment), I believe that it makes sense to stretch that valuation into the $28 to $35 million range. This conclusion is contigent of the Blue Jays having an internal evaluation of Soler's talent on par with what has been implied by several rankings on his talent and comparisons to other players. A better evaluation would justify bidding higher, and of course vice versa.
So it's the last week of February, Spring Training games are around the corner, the off-season is effectively over and all the big names one could dream of adding to the Blue Jays roster are off the board - Pujols, Fielder, Darvish, Cespedes, Jackson, etc. But there is still one name out there, who would perhaps be the best fit with what the Jays philosophy and contention timeline - and that's Jorge Soler.
The 19 year old Soler has yet to have been declared a free agent, but it's expected to happen soon, at which point there will be a bidding war to secure his services before the international free agency bonus cap takes effect on July 2. Initially it was thought he would secure between $15-20 million, but with the Yankees, Red Sox, Phillies and Cubs among the leading suitors, and it being the last chance to throw money around to secure talent, not surprisingly the expected price has skyrocketed. The rumour last week was that the Cubs had an agreement in principle with Soler for 4 years/$27.5 million (which, if true, would be counter to MLB rules and possibly illegal since the US government has to unblock Soler).
The Jays apparently had Soler work out at their complex in the Dominican last week, but other than that, there's been very little linking them to Soler. Of course, the way AA works, this would almost be a positive indication of interest. So it begs the question - what is Soler worth? How high should the Jays go to in the bidding? Of course, this will depend on internal evaluations of Soler to which we are not privy, but that shouldn't stop us from trying to estimate his value.
In a December 2011 Ask BA column, Jim Callis suggested that if Soler had been available in the 2010 or 2011 drafts, he could have been a top 5 selection, and compared his 5 tool profile and upside to Bubba Starling while suggesting he could end up in the 11-20 range of the top 10. Since then, BA has published their Top 100 list, on which Starling placed 24th. In the accompanying chat, Callis indicated that Soler would have been 43rd on his list. Similarly, Kevin Goldstein of Baseball Prospectus ranked Starling 28th in his Top 101, and would have had Soler 10 spots behind at 38. Given these datapoints placing Soler a little behind Starling, who was 5th overall in a very deep draft, I think it's safe to say this is an appropriate ballpark of his talent.
So how much have comparable quality prospects been worth? I assembled a list of high school outfielders drafted in the top 10 picks overall of the Rule 4 from 1986 to 2005 to use as measuring stick. I included players drafted as infielders but who almost immediately transitioned to the outfield - they may have been prep shortstops, but profiled as pro outfielders and should be included in the comp set. I chose the 1986 to 2005 timeframe since 1986 was the first year that there was only one draft (prior to that there was the January draft and secondary draft, and the June secondary draft) and only to 2005 since after that there isn't enough time to evaluate the player's contribution. As it is, I had to project a few seasons using a 5/4/3 weighting of the last 3 season's WAR in order to round out the cost controlled years.
This gave me a list of 31 players, presented below. Essentially, the bonus being paid to Soler is to secure his rights until he becomes free-agent eligible, and the surplus value this entails. For each cost-controlled (pre-free agent eligible) season, I compiled the WAR produced (using an average of fWAR and rWAR) in the years after the player's draft year. If the WAR was negative, I substituted zero. That leaves us the problem of how much that production is worth. To solve this without having to account for different years, and different nominal values, I discounted the WAR produced in a given year back to Year 0 (the draft year), using a 5% discount rate meant to approximate the salary inflation rate. This allows an apples to apples comparison in that time is neutralized, and takes into account that when the team makes an investment, they want to get a return on that investment as early as possible (for example, rather than signing Soler or spending in the draft, you can sign a FA who will produce immediately). After this, we still have to account for the salary paid in order to determine the surplus value. I estimated that two-thirds of the production was surplus value, based on the ability to pay players essentially the minimum for 3 years, and then using the 40/60/80 rule of thumb for arb salaries compared to free agent value. This gave the following results (seasons with projected performance in blue):
On average, a high school outfielder drafted in the top 10 produced 4.0 discounted surplus WAR, however this is skewed upwards by a small number of very successful players, as the median is 3.4 WAR. 10 of the 31 players (roughly 30%) never even made it to the majors, and 3 others were marginal producers. On the other hand, 12 players produced over 10 WAR, and a number of those were stars and provided star level production for several years. To given an idea of the sensitivity to the discount rate used, I present below the summary output using a 3% discount rate and a 7% discount rate.
If we take the average value of 4.0 discounted surplus WAR (at 5%), and value that production at the going market rate of $5M/WAR, Soler would objectively be worth a bonus of around $20M. If you used a lower discount rate to get a higher WAR of 4.6, you can push that towards $23M. Of course, what he gets in a bidding war is unlikely to stick to objective valuations. The constraint on the other end is the opportunity cost of the money that you could spent on Soler, which due to restrictions in the draft and international spending the AA prefers, essentially means spending on free agents. From a financial perspective, a value maximizing manager would not spent money if the expected payoff was negative, and beyond that would be indifferent to spending when the expected internal rate of return (IRR) is the same. AA has publicly said that in his view free agents generally don't deliver great value, and I've done some research suggesting free agent talent is expensive relative to homegrown players by as much as 20- 30% (I'm including some tenative results from further research I've done and haven't published in addition to this). Thereofre, I believe that given thiese contraints and alternative uses, a bid could be inflated by a similar percentage. This would imply a contract more on the order of $28-35 million.
Of course, if the Jays had a materially higher view of his talents, then a higher bid would be in order and completely justifiable. That said, the players to which Soler is being compared are very select, among the cream of the prospect crop over the past three decades. I would be quite skeptical that a player's realistic evaluation could be a lot higher, without hype beyond what is currently being according Soler. Likewise, if the talent evaluation is more pessimistic, then it doesn't even make sense to bid given where the market is. In the end, we will have to wait and see, and hope the Jays can land Soler at a somewhat reasonable price.