I've owned an online shop before selling computers and computer parts rather than tools and I would never treat customers like this as it's purely terrible business and short-sighted.
1. If it's a pricing error, you honor it. You're not an Amazon.com or Walmart. Pricing is entered by one guy or a few people with one person ultimately responsible. If you can't enter a price properly, that's on you. However, this situation doesn't hint towards a pricing error from what I've seen.
2. If it's a sale with limited availability and you sold way too many, you either extend an offer to ship one at that price when new stock arrives, or issue a coupon. You can not offer a great deal such as this and not have real-time inventory to support the sale. If you offer a deal like this then you must be prepared to honor it if your inventory person isn't on top of it.
Also, I'm pretty sure most of us would have been happy with a $25 off $50 coupon and this would have accomplished two things: brought in a whole bunch of orders where you basically break even or take a reasonable loss, and also result in those who can't help themselves and go on a little spending spree as we're all liable to do on occasion when browsing for tools.
3. This will have turned off a lot of people to Drill Spot for a long time, or forever. By honoring the price or issuing a coupon, they would have displayed quality customer service and I absolutely guarantee they would make their money back over time from repeat business due to this positive reputation versus whatever losses they took from honoring the price/issuing a coupon.
As I said, extremely short-sighted and terrible business decision.