Apparently they announced the game at the same time as the layoffs so they'd be able to release a demo and some promotional material. That way the people they laid off would still be able to show off their work to prospective employers as they job hunt.
I'm sure it's also a final hail Mary effort to attract the attention of investors so they might fund the rest of the game, but still, seems like a pretty practical way to shelve a project — definitely not as crazy as the headline makes it sound.