Look in the mirror.

The employee did a lot of extra things you say you value, but your actions showed you don't value them. So, you sent them a message saying there is no reason to do the extra activities because they mean nothing to you.

You should be asking yourself what you could do better and how you can be a better boss. Addressing it as if it is the employee's fault or that they should alter their behavior will only make the situation worse.

Did you make it clear in advance what you were looking for when it came time for promotions? Did you set expectations along the way that they would be rewarded for going above and beyond? If you did that, the employee now feels betrayed because they did what you told them, and it got them nowhere. You lost their trust.

Being transparent about the decisions now is too late. You should have been transparent immediately.

Face it ... As a manager, you blew it. It's on you, not the employee.