The private shareholders are not inherently entitled to any particular profits. They are entitled to what was specified in the IPO contract. The relative magnitude of the effect on public shareholders is not relevant. What kind of precedent is being set here?
There is nothing wrong with adjusting the contract as long as everybody agrees. However, the unilateral nature of this change is not justified and there doesn't seem to be consensus. DeaDTerra needs to have a stronger case to propose a change like that. Otherwise this indeed sets a terrible precedent of fudging the contract and undermines the trust in this security.