Compass Digital Acquisition Corp. (CDAWF)

The warrant structure. CDAWF represents one of the core components of Compass Digital’s capital raise. When the SPAC went public, it sold units — each containing one share of common stock and one-half of a warrant. The warrants separated from the units and now trade independently, entitling the holder of one full warrant to purchase one Class A share at an exercise price of approximately $11.50 per share. Because two partial warrants are needed to make one full warrant, ticker CDAWF reflects the half-warrant trading unit.

Why warrants exist in SPAC structures. Warrants are a mechanism that allows sponsors to raise capital while remaining relatively indifferent to the initial trading price of the units. If units trade below the SPAC’s initial price, common shareholders have incentive to redeem (demand their cash back), which would shrink the capital pool available for an acquisition. Warrants sweeten the deal for long-term investors — they offer upside from share-price appreciation without requiring additional capital beyond the original unit purchase. They also provide sponsors with a tool to fund their own promote (the shares sponsors themselves receive for sponsoring the SPAC). Structurally, a warrant is a call option: it gives the holder the right, but not the obligation, to buy a share at a set price.

The leverage embedded. An investor in CDAWF holds a leveraged position on Compass Digital’s eventual business combination. If the merged company trades at $15 per share, a warrant holder can exercise at $11.50 and sell the resulting share at market price, capturing the $3.50 spread. That spread is the warrant’s intrinsic value. But the leverage cuts both ways. If the merged company trades at $10 per share, the warrant is worthless — there is no reason to exercise at $11.50 if you can buy the share cheaper in the market. The warrant holder has lost the entire investment, while a common shareholder still holds a position worth $10 per share. This asymmetry — large upside potential but exposure to total loss — makes warrants riskier and more expensive than holding common shares.

Time decay and expiration. SPAC warrants typically expire five to seven years after the merger closes, though specific terms vary by deal. As expiration approaches, time value erodes. The closer the warrant gets to expiration without the underlying share moving materially above the exercise price, the less valuable the warrant becomes. An investor buying CDAWF late in the warrant’s life faces the dual risk that the share doesn’t appreciate much and that the warrant expires worthless.

The Key Mining context. Following the announced January 2026 merger between Compass Digital and Key Mining Corp., warrant holders face a transformed investment. The merged entity, Titan Holdings Corp., will be a publicly traded critical minerals company rather than a blank-check vehicle. The warrant’s intrinsic value will then depend on Titan’s mining assets, commodity prices, and execution on development projects. This is a material shift — the warrant moved from leveraging a SPAC sponsor’s ability to find and negotiate a deal, to leveraging an operating mining company’s ability to generate cash flows and growth.

Pricing dynamics. Before and after merger, warrant prices reflect three variables: share price (driving intrinsic value), time to expiration (driving time value), and implied volatility of the underlying share price. SPACs that announce strong deals with well-regarded sponsors tend to see share prices and warrant prices rise. Uncertain deals or unpopular targets can depress warrant values sharply. Investors in CDAWF would want to monitor Titan Holdings’ progress in bringing Key Mining assets into production and the outlook for critical minerals pricing. Warrant pricing in post-merger SPAC names is often volatile because these companies remain high-beta, lower-liquidity securities relative to large established firms.

Practical considerations. Warrant holders must keep track of exercise mechanics, as different SPACs use different systems. Some require holders to exercise through a broker; others require direct engagement with a transfer agent. Redemption rights and cash-settlement options vary. The warrant agreement itself — a document filed with the SEC — specifies all terms. Investors should read it carefully, particularly the expiration date, anti-dilution provisions, and any adjustment mechanisms triggered by corporate events.