He is partnered with the saudis, no? They’ll easily be looking into buying any debt at a discount and converting it to equity. They’re richer than Elon. Money to them isn’t real. They just produce more oil. Or slash production to drive the price up, to earn more.
The Saudis rolled over their existing investment in Twitter. They did not put in fresh capital, as far as I know. But yes, they hold equity in Twitter.
Once we are into, "large players with big bankrolls will do things that are not in their economic interests" the potential scenarios increase, I guess. But let's play along. The Saudi's buy the debt for $7B. Then they hold the debt and Musk is no better off. So, as you write, the Saudi's decide to convert that debt into equity. At what valuation? If I was the Saudis I would say that the current valuation for Twitter is about $7B. After all, that is what the senior secured debt is worth and it has first claim on all future cash flows (more or less).
All this is to say that the Saudis could/should own most of Twitter at the end of all this. Musk is heavily diluted. Musk is worse off. Seems like a bad result for him.
Or, I guess, the Saudis could just say that they will convert the debt at a valuation of $100B and the other equity people madly scramble to take that deal. Problem solved!
But what do the Saudi's get out of it? Money is not actually free to them and presumably they they are already following a strategy to maximize the NPV of their existing hydrocarbon reserves. & when they invest abroad, they mostly seem to try to get economic returns for those investments like any other investor.
I guess that they could just really want to be in business with Musk. Musk could offer them 3 things off the top of my head. A special deal with Tesla. Tesla is public and so that would be have to be something like "I will build a gigafactory in Saudi Arabia and make your country the a hub for the manufacture of EVs in the region". Ok - I think that shareholders would oust Musk over something like that but he has done dodgy things in the past and gotten away with it and so YOLO. Or Musk could offer them part a future SpaceX IPO. SpaceX has raised money privately several times and Musk could run into issues with other shareholders if he gives the Saudis a sweetheart deal. The US government might not like it either. If SpaceX IPO's then Musk could get the Saudi's a bunch of the initial shares via the underwriters with the understanding that the shares will pop on the open and the Saudi's recoup their investment. I guess this is possible and Musk would like it because it would not actually cost him anything. All he is doing is giving a supporter the chance to make money on the open market at no cost to himself. There are probably some pesky legal issues around all this but underwriters allocate shares in "hot IPO's" to friends of the firm all the time and so I am sure that there are legal ways to make it happen.
Or I guess that the Saudis could just think "Elon, you may have royally fucked up the Twitter deal (after all, this entire discussion is based on staving off Twitter bankruptcy) but we still think you are a business genius and we just want to be friends with you because when you embark on your next great company, you will put us in on the ground floor". That could actually be a thing!
We shall see. No one thought Elon would actually buy Twitter so strange times indeed.
