>Why would employees exercise prior to departing and/or with no exit in sight?

Mainly to avoid taxes if stock price goes up.

If the price is $1 today and you exercise the option to buy stock, you pay taxes on $1.

If the price goes up to $20, you pay taxes on $20.

If the company fails before you can sell, you loose moeny in both cases. However, if you wait, you payed a lot more taxes on stock that is worthless.

People can easily pay hundreds of thousands in taxes on stock that they can never sell. Also, sometimes the stock goes up so much that employees cant afford the tax bill to exercise the option, because the stock cannot be sold until IPO.

https://secfi.com/learn/exercise-stock-options-tax-implicati...

https://carta.com/blog/equity-101-exercising-and-taxes/

It's last year, and an employee wants to change jobs. But tech is sky high, they are confident about the companies future, and want to get the tax benefits of exercising before they leave.

Or it's last year, and an employee wants to lock in the FMV for AMT before the next round/IPO.

It's definitely an aggressive move, but I can understand why someone would exercise.

This depends on how much regular income the employee has, how much cash would be required to exercise the options and personal risk tolerance, but it could potentially be a way to avoid AMT tax (and instead pay long term capital gains tax) when the company eventually has an IPO or other exit and the employee decides to sell their equity.