Welcome to Hockey Curious.
The NHL Trade Deadline is tomorrow. Today we are going over:
Why the Lightning traded for Tanner Jeannot ⚡
The qualifying offer 📝
A closer look at how MIN and WSH leverage liquid assets to retool 🌊
Earlier in the month I wrote about why middle-of-the-lineup contributors with term and a low cap hit are some of the most liquid assets in the league. The Brandon Hagel trade set the precedent for this type of asset and I wanted to find out who this year’s Hagel could be.
Related readings:
Sam Lafferty was a player that fit my criteria and was acquired by the Toronto Maple Leafs along with Jake McCabe.
Tanner Jeannot however, was not on my radar because his contract was expiring at the end of the season and therefore didn’t match my criteria. Adding contracts that expire this year as restricted free agents (RFAs), like Tanner Jeannot’s, is an interesting wrinkle to my search parameters because of a contract mechanism - the qualifying offer.
Need to know’s about qualifying offers (QO):
Only applies to Group 2 and 4 RFAs
The qualifying offer is an official Standard Player Contract (SPC) offer and 1 year in length
The salary is determined by a percentage of the previous base salary (between 100-120%)
Gives the club some cost control and protections (ie. salary arbitration and draft pick compensation)
Jeannot’s qualifying offer will be:
$800,000 * 105% = $892,500.
Essentially, even though Jeannot’s contract expires this year, the Lightning are confident knowing that he is under control for at least another season, giving them two playoff runs at an extremely affordable price.
This doesn’t necessarily mean they go down this road. Jeannot could opt for salary arbitration which could make his cap hit higher. The Lightning could try and give him the Nick Paul treatment and lock him up long-term. Or they can handshake agree to accept the qualifying offer and have a long-term contract in the waiting.
Long-term, Jeannot makes sense as an Alex Killorn replacement who expires this summer. If they are able to backfill Killorn with Jeannot for a fraction of Killorn’s cap hit, that helps the Lightning accommodate for the other extensions that they have signed while maintaining a highly competitive roster.
It was a steep price to pay that heavily weakens their asset pipeline but they don’t need to re-tool or build a second core. Those pieces are already developed and locked up. They are trying to give the group as much gas as possible to chase history. Why not go all in?
Related reading: Tampa Bay’s Asset Pipeline
The average team in the flat cap era (2019-Present) has increased their cap space usage by 4.6% compared to the average team from (2015-2019).
With more teams than ever being pressed up against the salary cap, it has become exponentially more difficult to reposition the asset mix. In a cap space-hungry marketplace, leveraging liquidity is how business gets done these days.
In a previous newsletter, I wrote about how teams can cultivate buying opportunities by analyzing liquidity.
This time, we will be looking at how re-tooling teams can maximize value and accomplish their roster objectives with liquidity as the vehicle.
What is a re-tooling team? They are a team that has realized their asset mix is poorly allocated and wants to reposition it without sacrificing too much of the present.
They are looking to move older players that don’t fit into their plans for younger players that are already NHL-ready. The problem is, rarely can a re-tooling team find a partner that is both buying older players and selling young NHL ones.
Finding a “hockey trade” is tricky, especially at the trade deadline. As the market creates a distinct buyer and seller, teams that desire a ‘hockey trade’ should be playing both sides of the market in order to maximize the value of their assets and find the right acquisition.
The team should close out their positions on older assets for high liquidity assets in draft picks and prospects. Arming themselves with cap flexibility and trade capital allows them to reposition their asset mix. They can open a new position on a young, NHL-ready player from the right trade partner.
The Washington Capitals are executing this concept currently. They closed their positions on Dmitry Orlov (31) and Garnet Hathaway (31) to Boston for a 1st, 2nd, and 3rd round pick. Then they used the acquired 1st and Erik Gustafsson (30) to acquire Rasmus Sandin (22).
They maximized the value of their aging veterans by being paid in draft picks and then maintained the strength of their roster while getting younger by spending some of their acquired trade capital. For a team trying to force open a competitive window in Alex Ovechkin’s twilight years, this is how to do it.
The Minnesota Wild used the most liquid asset at their disposal, cap space, to acquire draft picks as a third-party broker.
Related reading: How much does a draft pick cost?
Acting as a broker, their transaction fee netted them a 4th round pick to take on 25% of Ryan O’Reilly and a 5th round pick for 25% of Dmitry Orlov.
Then they went and traded a 3rd round pick for Marcus Johansson and the 5th-round pick from Orlov to acquire Gustav Nyquist. It’s tidy work for a team that wants to compete in the playoffs this year but realizes they aren’t in the position to go all in and deplete their asset pipeline. Instead, their asset pipeline comes out nearly net neutral as the number of picks remains unchanged but they swap a 3rd for a 4th.