Improvements and advancements would stagnate due to the 25x duplicated effort, and resources would be lost in keeping those projects happy. Also, any potential user looking to switch would be deluged with options, which is what crippled desktop Linux.
While I do not understand enough about Pine to know why they specifically made the business decision to gut their dev community and go with Manjaro Linux, my guess would be something along the lines of Manjaro's widespread dominance as a top Linux distro backed by a powerful foundation. Pine is pivoting to what they have decided is their future: a full-stack hardware to software open source offering that in their eyes would have a better shot at cracking open the phone market.
They probably were aware of the consequences, but have bet on making it big and creating a new, streamlined ecosystem after extinguishing this one. It remains to be seen if they will succeed.
* OS 1 finds a bug in Gnome, reports it and perhaps fixes it
* OS 2 benefits from pulling in the new code as well, fixing bugs
* OS 3 writes a driver for the camera and publishes it as part of their kernel
* OS 4 finds a bug in the camera driver they started using, publishes their fix
Yes, there's some overheard to running 25 projects. There's also a huge downfall to excluding 24 projects from contributing as first class members of the project. To boot, it's also a situation where the more contributions make the fixes contributed even more battle tested and beneficial.
tl;dr - OSS development styles don't map onto commercial development styles cleanly