This move was much needed 1 year ago - just an awful place to work all around.
Most of the raelly good people I met there have left - the people I know that stayed either had golden hand cuffs or weren't the high achieving type, to put it nicely.
Those aren't really worth much anymore -- once you hit a bump in the road, employee options are the first things to be wiped out. If investors received a larger share as has been reported, it's in preferred shares, which probably wipes out the employee options.
Sacks was pretty good about handling that situation.
Still agree with your overall point though - it's going to be a long, long time before those shares are worth anything.
So founders, former employees, and earlier investors probably lost out...
Also, define "current". What matters the most is its valuation at exit relative to its valuation in the final few funding rounds.
2. When new shares are issued, usually preferred shareholders get shares for free to maintain their percentage in the company. Other existing shareholders do not, of course.