In the span of roughly 20 minutes the highly rated Mississippi offensive tackle, Laremy Tunsil dropped about 10 spots to the number 13 pick in the NFL draft. Moments before the draft began a video of Tunsil smoking an unknown substance from a bong surfaced on his twitter account. The tweet was deleted just minutes after posting but the damage was done. Some analysts estimate the incident may have cost him in the neighborhood of 7 million dollars in salary.
However, there was more on display here than costly twitter images. What the draft also demonstrated, was the speed at which information travels, and the subsequent market re-pricing based on new developments. In essence, Tunsil’s draft stock went from an exceptional, can’t miss growth prospect to distressed undervalued gamble.
In the weeks and months leading up to the draft, teams scrutinize over the most trivial details surrounding the athletic abilities, physical features and personal lives of potential draftees. 32 NFL franchises set the market for the 253 draft slots. Each team has its own unique set of needs with only a small talent pool to choose from. The consequences for missing with a boom or bust prospect are severe; often costing head coaches their jobs. Run-ins with the law, knee injuries and work ethic all represent elements of risk.
While Laremy Tunsil began the draft as an asset many were willing to sacrifice a costly number one pick for, he quickly became a discounted value choice for the eager Miami Dolphins, who never expected him to be around by the 13th pick. On the field few questioned his athletic ability. As a three-year starter in college football’s toughest conference, he kept some of the nations best pass rushers at bay with his size and agility.
Teams pay more for players with strong track records due to the expectations that consistent earnings, in the form of on field success, will persist. With Tunsil, the price teams were willing to pay changed in an instant because suddenly he became a heck of lot riskier. Time will tell is his transgressions were momentary lapses in judgment or demonstrations of deep seeded character flaws. In 3 years we’ll know if the 12 teams that passed on him dodged a bullet, or if the Dolphins landed a their next Pro Bowl player at a tremendous value.
By Tim Baker, CFP®
Advice and investment design should rely on long term, proven evidence. This column is dedicated to helping investors across the country, from all walks of life to understand the benefits of disciplined investing and the importance of planning.