Company: CDAQF
Filing Date: 2025-03-13
Form Type: PRE 14A
Source: 0001493152-25-010116
Chunk: 69

Company: Compass Digital Acquisition Corp.
Filing Date: 2025-03-13
Form: PRE 14A
Chunk 69
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 A copy of the proposed Redemption Limitation Amendment is provided in the second resolution in Annex Aattached to this Proxy Statement.

Without the Redemption Limitation Amendment, our Board may not be able to proceed with the Third Extension if, following the Third Extension Redemptions, we would not have at least $5,000,001 in net tangible assets. If that were to occur, and we do not consummate the EEW Business Combination by April 19, 2025, we would be forced to liquidate.

As disclosed in the IPO Prospectus, we are a blank check company formed for the purpose of effecting a Business Combination. Under Rule 419 of the Securities Act, the term “blank check company” means a company that (i) is a development stage company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person; and (ii) is issuing “penny stock,” as defined in Rule 3a51-1 under the Exchange Act. Rule 3a51-1 sets forth that the term “penny stock” means any equity security unless it fits within certain enumerated exclusions including the NTA Rule. Rule 3a51-1(a)(2) of the Exchange Act also excludes from the definition of “penny stock” a security that is registered, or approved for registration upon notice of issuance, on a national securities exchange, or is listed, or approved for listing upon notice of issuance on, an automated quotation system sponsored by a registered national securities association, that has established initial listing standards that meet or exceed the criteria in the rule (the “ Exchange Rule”). Historically SPACs have relied upon the NTA Rule to avoid being deemed a penny stock issuer.

Reasons for the Redemption Limitation Amendment and Redemption Limitation Amendment Proposal

As discussed below, after careful consideration of all relevant factors, our Board has determined that the Redemption Limitation Amendment is in the best interests of our Company because it may facilitate the consummation of the EEW Business Combination.

The Redemption Limitation in our Amended and Restated Charter limits our ability to consummate a Business Combination, or to redeem Ordinary Shares in connection with a Business Combination, if it would cause us to have less than $5,000,001 in net tangible assets. The purpose of the Redemption Limitation was initially to ensure that the Ordinary Shares were not deemed to be a “penny stock” pursuant to