That’s why this was scrutinized more and the California AG got involved but it’s not that rare either.

Novo Nordisk the maker of Ozempic for example IPOd, diluting the Novo Nordisk Foundation’s share (though they still have controlling voting rights due to share classes IIRC) to raise money. SRI International spinoffs often get sold (Siri) or raise money and IPO (Nuance) diluting the nonprofit’s share significantly in the process.

A nonprofit that owns a for profit subsidiary is no different than a regular shareholder and can decide that diluting to reward employees or get investors is worth it to grow the value of the whole company.