EK65 Sharks contract termination is wildly hypothetical but possible

• Editor's Note: Sheng Peng will be a regular contributor to NBC Sports California’s Sharks coverage. You can read more of his coverage on San Jose Hockey Now, listen to him on the San Jose Hockey Now Podcast, and follow him on Twitter at @Sheng_Peng.

"EK65 Trade Watch" has entered the dog days of August.

On July 1, there were rumors that the Sharks were close to trading 2023 Norris Trophy winner Erik Karlsson to the Pittsburgh Penguins. For whatever reason, that deal didn’t materialize. Since then, there has been a drip of information here and there, but it's been slow going.

The Penguins and Carolina Hurricanes appear to be most interested, while Karlsson himself confirmed that he has also talked to the Toronto Maple Leafs and Seattle Kraken about playing for them, though they don’t appear to be serious suitors. The Sharks, apparently, don't want to retain as much of Karlsson's remaining contract as other teams want. And teams don't want to trade as much for Karlsson as the Sharks would like.

"Those teams have all essentially sat back and said, 'Hey, call us in August,' " insider Frank Seravalli said last week.

Well, it's August.

In the absence of concrete news, a player of Karlsson's stature has attracted a lot of speculation, unsubstantiated trade proposals -- I've been guilty of that -- and more.

So here's a wild idea that I've heard -- but thinking about it, there's a degree of plausibility to it. Enough so that I asked two player agents and long-time front office executive Mike Santos for their opinions.

Here's the thumbnail version: Karlsson has four more years left in his contract at $11.5 million AAV. He wants to leave San Jose to win a Stanley Cup. Teams, naturally, are challenged to fit that cap hit into the $83.5 million salary cap.

Could Karlsson and the Sharks agree to mutually terminate his contract? The Sharks would be completely off the hook from Karlsson’s contract. The swashbuckling defenseman could be an unrestricted free agent and pick his destination.

On the surface, the notion sounds completely ludicrous and not worth exploring at all. Karlsson should walk away from four years at $11.5 million per season ... for free agency? Whatever contract that he could fetch on the open market right now, it wouldn’t be four years and $46 million.

And don’t expect Karlsson to take a pay cut.

"Our careers are short, and everyone deserves what they get," Karlsson said two weeks ago, when asked if he bemoans his boulder-like contract. "We must capitalize on our market value, so I have no regrets."

And he shouldn't. When Karlsson inked his eight-year, $92 million contract with the Sharks in June of 2019, he arguably was the best defenseman in the world. In short, he got the deal that he deserved at the time.

But the devil's advocate is in the details: Karlsson’s contract was front-loaded, so he has already received the majority of the actual cash in the first four years of his pact. Remember, AAV is the Annual Average Value of a deal, not necessarily what a player is actually paid.

How much cash is Karlsson owed for the last four years of his contract? It's a good chunk less than $11.5 million times four: $39 million cash over the next four years.

So conceivably – just conceivably, I know it's still a wild hypothetical – Karlsson and the Sharks could agree to a mutual termination of his pre-existing contract, and Karlsson could sign a four-year, $39 million agreement ($9.75 million AAV) with the team of his choice.

If the Sharks really don't want to retain money, to pay a player to perform for another team for that long -- well, here's their chance to wash their hands completely clean of Karlsson's contract. And for Karlsson? He doesn’t lose a cent from his original contract.

"It’s possible," Agent No. 1 said, before outlining the unlikelihood of it.

Agent No. 2 agreed.

Agent No. 1 didn’t think Karlsson’s agent, Craig Oster, or the NHLPA would look favorably on this type of precedent, a player walking away from a significant contract in favor of free agency.

"Future deals of older players, who knows?" Agent No. 1 mused. "Maybe [teams eventually try to] force a player to walk away from a deal if not traded."

Santos agreed, saying about this scenario to the San Jose Hockey Now Podcast, "There's too much at play there."

Also, the obvious question: How many teams could or would want to take on a $9.75 million AAV contract with a 33-year-old defenseman for four more years?

It just takes one though. And the Penguins might already be a willing team.

"I believe that's essentially where the Penguins are, it's like 'Hey we don't even have anything to trade you. We have nothing. We have no picks, prospects, we have nothing,' " Seravalli said in mid-July of Pittsburgh trading for Karlsson. "So if you want to give him to us, we’ll take him on for 9.5 million bucks."

Seravalli, essentially, was intimating that the Penguins would take on Karlsson at a $9 million-plus AAV, as long as the Sharks retained about 20 percent of Karlsson's contract, and they didn't have to give San Jose anything of consequence.

Of course, Pittsburgh would have to clear a lot of cap space to afford even a slightly-reduced Karlsson contract. It's feasible, but that's a conversation for another story.

As for the Sharks? Look, I get the goal is to trade the reigning Norris Trophy winner for three first-round draft picks. But that deal isn’t there, not even close, at least at 20 percent salary retention.

So unless the Sharks are willing to significantly increase how much they're willing to retain -- that should improve trade offers -- getting Karlsson's entire remaining contract, zero retention, off the books should at least be considered.

Don't underestimate what you can do with $11.5 million AAV a year in cap space, be it to improve the current roster or acquire draft picks for taking on other teams' bad contracts.

Agent No. 1 agreed and disagreed, "Really, San Jose is two or three years away from being good again. Cap space doesn't help them now other than saving money or taking on other teams' bad contracts."

Santos added, rhetorically: "Do the Sharks have a cap problem right now?"

And he;s right, San Jose currently is about $6 million under the cap.

"He's an All-Star player. They should fetch something for him that helps their organization be successful in the future, more than just getting the contract off their books," the long-time NHL executive opined.

That likely means paying Karlsson a lot to play for somebody else.

But if these are the kind of offers that are out there for Karlsson right now? Receiving nothing for him except getting the entire contract off the books?

"This is the Sharks' best chip right now for building their future," Santos stressed. "They need to maximize their return."

"Parties need to work together and wait until the trade deadline or next summer,” Agent No. 2 forecast.

Of course, Karlsson will need to stay healthy and productive to keep his trade value up. On the other hand, the cap is expected to rise significantly next offseason.

"I think he gets moved [this offseason]," Agent No. 1 said. "Just may take time and San Jose realizing what teams are willing to do and taking the best deal [possible]."

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