Does a public offering destroy shareholder value?

I am new to investing, could you explain this to me. Say a company is trading at $1.00 with a 10 million dollar market cap. They then give a 5 mil public offering at $0.50 per share. Upon the announcement, the company's stock plummets to around $0.50 per share. They perform a 1:10 reverse split to avoid delisting. People who took part of the public offering have the option to exercise for 5 years. If you were a stock buyer from the open market just AFTER the share offering, when the price was sitting at $0.50, you are screwed because of the reverse split setting your cost basis at $5 per share, and the fixed value of the public offering at $0.50 per share. The market is flooded with cheap shares. Am I mistaken?