A. Selected financial data
[Reserved]
B. Capitalization and indebtedness
Not applicable.
C. Reasons for the offer and use of proceeds
Not applicable.
D. Risk factors
You should carefully consider the risks and uncertainties described
below and the other information in this annual report before making an investment in our ordinary shares. Our business, financial condition
or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of
our ordinary shares could decline and you could lose all or part of your investment. This annual report also contains forward-looking
statements that involve risks and uncertainties. See “Forward-Looking Statements.” Our actual results could differ materially
and adversely from those anticipated in these forward-looking statements as a result of certain factors.
10
Summary of Risk Factors
The following is a summary of some of the principal risks we face. The list below
is not exhaustive, and investors should read this “Risk factors” section in full.
• Risks related to the Agreement and Plan of Merger we entered with Hapag-Lloyd AG, a German stock corporation (Aktiengesellschaft) (the “Parent” or “Hapag-Lloyd AG”) incorporated under the laws of Germany, and Norazia (Israel) Ltd., a company organized under the laws of the State of Israel and a direct or indirect wholly owned Subsidiary of Parent (“Merger Sub”) on February 16, 2026, pursuant to which Merger Sub will merge with and into us, so that we will continue as the surviving corporation in the Merger and a wholly owned subsidiary of Parent. The consummation of the Merger is subject to a number of conditions, and there can be no assurance that the Merger will be completed in a timely manner or at all. There are many factors that could cause our actual results, level of activity, performance or achievements or matters relating to the Merger to differ materially from the results, level of activity, performance or achievements expressed or implied by our expectations or our forward-looking statements, including without limitation: (i) the parties may fail to satisfy any of the conditions to the closing of the Merger Agreement, including the potential failure to obtain approval by our shareholders or applicable regulatory authorities; (ii) we may incur unexpected costs, liabilities or delays relating to the Merger Agreement; (iii) our business may suffer as a result of uncertainty surrounding the Merger Agreement and diversion of management attention on matters related to the Merger, including the loss of or the deterioration of our business with our vendors, partners, contractors and employees; (iv) we may become subject to legal proceedings related to the Merger Agreement, and the outcomes thereof; (v) we may be adversely affected by other economic, business and/or competitive factors; (vi) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger; (vii) difficulties in recognizing benefits of the Merger Agreement; (viii) the transactions underlying the Merger may disrupt current plans and operations and raise difficulties for employee retention; (ix) impact of the Merger Agreement on our business relationships; (x) other risks relating to the Merger Agreement, including the risk that the Merger Agreement transaction will not be completed within the expected time period or at all, and that its termination under certain conditions could result in the requirement we pay a termination fee;
• The container shipping industry is dynamic and volatile and has been marked in recent years by instability and uncertainties as a result of global geopolitical and economic conditions and the many factors that affect supply and demand in the shipping industry, including the continued Yemeni Houthis’ attacks on ships in the Red Sea that forced most ocean carriers to reroute some of their vessels to alternative, longer and more expensive routes, the political and military instability in the Middle East including tensions between the U.S., Israel, Iran and Iranian-backed proxies, the ongoing military conflict between Israel, Iran, Hamas and other Iranian backed proxies, the political instability in Syria and Lebanon, the Russia-Ukraine war, U.S.-China tensions related to tariffs and other trade restrictions, regulatory developments, relocation of manufacturing, logistical bottlenecks in certain locations along the cargo carriage chain, potential rising, concerns of global recession, inflation and interest rates and fluctuations in demand for containerized shipping services, which could significantly impact freight rates.
• We are incorporated and based in Israel. Our results may be adversely affected by political, economic, and military instability in Israel and the Middle East. The fact that we are incorporated in Israel might limit our ability to conduct and expand our business, and we may be subject to boycotts or other restrictions which will prevent us from calling certain ports or that our business may be affected as a result of trade restrictions and embargoes applicable to Israeli trades.
11
• The military conflicts between Russia and Ukraine and between the U.S. and Venezuela, the U.S, Israel, Iran and Iranian-backed proxies, the ongoing military conflict between Israel and Hamas and other Iranian-backed proxies and other geopolitical instabilities may cause volatility in the financial markets, a reduction and instability in global trade and an increase in oil and bunker prices or consumption, which may have a material adverse effect on our business, financial condition, results of operations and liquidity.
• We charter-in most of our fleet, which makes us more sensitive to fluctuations in the charter market, and as a result of our dependency on the vessel charter market, our costs associated with chartering vessels are unpredictable and could be, in certain circumstances, high even when the freight market is in a downward trend, and we may not be able to charter enough vessels or at all, especially in times of low supply and high demand of vessels for hire in the market.
• Future imbalance between supply of global container ship capacity and demand may limit our ability to operate our vessels profitably.
• Limited or unavailable access to ports, canal passages and means of land transportation (mostly rail and trucking), including due to congestion, geopolitical events and extreme weather conditions. Unlike some of our competitors, we do not own or hold substantial investments in terminals, therefore our ability to respond to congestion and port and inland accessibility is limited.
• Changing trading patterns, trade flows and sharpening trade imbalances, regulatory measures, variable operational costs, such as container storage costs, terminal costs and land transportation costs, may increase our container repositioning costs. If our efforts to minimize our repositioning costs are unsuccessful, it could adversely affect our business, financial condition and results of operations.
• Our ability to participate in operational partnerships in the shipping industry remains limited, and may be further reduced by recent regulatory changes, which may adversely affect our business.
• The container shipping industry is highly competitive, and competition may intensify even further. Certain of our large competitors may be better positioned and have greater financial resources than us and may therefore be able to offer more attractive schedules, services and rates, which could negatively affect our market position and financial performance.
• We may be unable to retain existing customers or may be unable to attract new customers.
• We face various cyber-security risks both as a shipping company and as an Israeli-based company, particularly in times of war and military conflicts.
• Volatile bunker prices, including as a result of geopolitical events, environmental regulation, dependency on gas suppliers for LNG operated vessels or other economic events, may have an adverse effect on our results of operations.
• We are subject to environmental regulations, and in addition, ESG regulation and reporting requirements have intensified and are expected to continue to intensify in the future, including without limitation, with respect to the use of cleaner fuel and/or imposition of vessel speed limits, which could increase our operating expenses.
The container shipping industry is extensively regulated and recently has been subject to increased legislative
initiatives and extensive scrutiny by regulators around the world, especially in the U.S. and China. If we are found to be in violation
of the applicable regulation, we could be subject to various sanctions, including monetary sanctions. Furthermore, in recent years, several
governments have adopted and are promoting additional legislation intended to provide an advantage to local and/or national shipping industry
participants over foreign-based carriers. The U.S. and China have adopted new regulations which impose port fees on non-local carriers
and foreign-built vessels. These regulations are currently suspended until the last quarter of 2026, however, if resumed, will significantly
increase our operating expenses, and we may be unable to recover them from our customers or at all.
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Risks related to the Merger Agreement with Hapag-Lloyd AG
The Merger may not be completed due to the
failure to satisfy any of the conditions to the closing of the Merger Agreement or other reasons; such a failure could negatively impact
our ordinary share price, business, operations, financial condition, results of operations and/or prospects.
The completion of the Merger is subject to certain conditions, including, among others:
• the approval of the Merger Agreement and the Merger by the affirmative vote of the holders of a simple majority of the voting power of our ordinary shares represented at the next shareholders meeting;
• the approval in accordance with the Special State Share.
• the receipt of required regulatory approvals under applicable competition and foreign investment laws;
• the accuracy of the parties’ respective representations and warranties in the Merger Agreement, subject to specified materiality qualifications;
• compliance by the parties with their respective covenants in the Merger Agreement in all material respects;
• the absence of any law or order restraining, enjoining, or otherwise prohibiting or making illegal the consummation of the Merger;
• the lapse of at least 50 days after the filing of a merger proposal with the Companies Registrar of the Israeli Corporations Authority and at least 30 days after obtaining the Company Shareholder Approval;
• the delivery by the Company and Parent of their respective customary closing certificates;
• the absence of (i) any legal proceeding pending by a governmental authority that would reasonably be expected to result in a Burdensome Condition (as defined in the Merger Agreement) or (ii) any condition, objection, order, injunction, decree, judgment or ruling imposing a Burdensome Condition; and
• the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) having occurred on or after the date of the Merger Agreement.
The completion of the Merger is not subject to any financing condition.
The fulfillment of certain of these conditions is beyond our control. There can
be no assurance that any of the required approvals will be obtained, and the timing thereof cannot be predicted. If the closing conditions
are not satisfied or waived and the Merger is not consummated by the February 17, 2027, or if extended, by June 30, 2027 (the “Outside
Date”), either we, or Hapag-Lloyd AG, may, under certain circumstances, choose not to proceed with the Merger. We and Hapag-Lloyd
AG may terminate the Merger Agreement in accordance with its provisions. Moreover, if we terminate the Merger Agreement, or if Hapag-Lloyd
AG terminates the Merger Agreement following a change to our Board of Director recommendations with respect to the consummation of the
Merger Agreement, to pursue a superior acquisition transaction, or if we enter into an acquisition transaction within 18 months of the
termination of the Merger Agreement due to the failure to consummate the Merger Agreement by the Outside Date, under certain circumstances
we would be required to pay Hapag-Lloyd AG a termination fee of $150,000,000 in cash.
There can be no assurance that the Merger will be completed in a timely manner or
at all. If the conditions are not satisfied or waived in a timely manner and the Merger is not completed, our shareholders will not receive
any of the Merger Consideration of $35.00 per ordinary share. Further, unexpected events, change or other circumstances could give rise
to the termination of the Merger Agreement. In an event of failure to complete the Merger, our directors, senior management and employees
may have expended extensive time and effort and have experienced significant distractions from their work, and we will have incurred significant
transaction costs during the period between signing the Merger Agreement and the failed closing and after. In addition, we could be subject
to litigation related to any failure to complete the Merger.
If any one or more of these risks materialize, our financial condition, results of
operations, prospects, share price, business, growth plans and/or operations, as well as our ability to raise funds (if required), may
be materially adversely affected.
The State of Israel holds a Special State Share
in us, which imposes certain restrictions on our operations and gives the Israeli government veto power over transfers of certain assets
and share ownership above certain thresholds, and the State of Israel may not provide the required approval for the Merger
The State of Israel holds a Special State Share in us, which imposes certain limitations
on our operating and managing activities and could negatively affect our business and results of our operations. The Special State Share
requires us, among others: (i) to remain incorporated and registered in the State of Israel with its headquarters and principal office
domiciled in Israel, (ii) to maintain a minimal fleet of 11 seaworthy vessels that are fully owned by us, at least three of which must
be capable of carrying general cargo, (iii) at least a majority of our board of directors, including the chairperson, to be Israeli citizens,
(iv) the chief executive officer of the Company to be an Israeli citizen, and (v) prior written consent from the State of Israel
for any transfer or issuance of shares that confers possession of 35% or more of our issued share capital, or that provides control over
us.
13
In connection with the Merger Agreement, Hapag-Lloyd AG entered into a binding memorandum
of understanding with FIMI Opportunity 7, L.P. and FIMI Israel Opportunity 7, Limited Partnership (together, “FIMI”), pursuant
to which Hapag-Lloyd AG and FIMI have agreed to use their respective reasonable best efforts to obtain the approval to consummate the
transactions contemplated under the Merger Agreement, including the Merger and the Special State Share Release (as defined below), by
the State of Israel pursuant to the Special State Share (the “Special State Share Approval”) and to consummate the Special
State Share Assumption (as defined below). Pursuant to the Merger Agreement, Hapag-Lloyd AG has agreed to use reasonable best efforts
to obtain an irrevocable and perpetual release of us from all rights and obligations relating to the Special State Share (the “Special
State Share Release”), which may be obtained pursuant to a transaction (the “Special State Share Assumption”) in which
Hapag-Lloyd AG causes at least 11 qualifying vessels to be sold or transferred to FIMI (or another qualifying Israeli partner), and such
Israeli partner enters into a binding assumption agreement with the State of Israel pursuant to which it assumes the rights and obligations
of the Special State Share effective as of the closing of the Merger.
There is no assurance that the Special State Share Release will be obtained, in a
timely manner or at all, or under which conditions. If we cannot obtain the Special State Share Release, we will not be able to complete
the Merger as planned and this may materially and adversely affect our financial condition, results of operations, prospects, share price,
business, growth plans and/or operations, as well as our ability to raise funds.
Because the Special State Share restricts the ability of a shareholder to gain control
of our Company, the existence of the Special State Share may have an anti-takeover effect and therefore depress the price of our ordinary
shares or otherwise negatively affect our business and results of operations.
The pendency of the Merger Agreement could
materially harm our business and results of operations
The pendency of the Merger may cause uncertainty about our future and disrupt our
business. The Merger Agreement generally requires us to operate our business in the ordinary course and restricts us from taking certain
actions until the Merger is completed. The Merger agreement includes covenants and other limitations which may limit our strategic opportunities
and ability to respond quickly to market trends. These restrictions may prevent us from pursuing otherwise attractive business opportunities,
making certain investments, or making other changes to our business that could be beneficial to our shareholders. While the Merger is
pending, we are subject to a number of risks that may harm our financial condition, results of operations, prospects, share price, business,
growth plans and/or operations and our ability to raise funds, including, but not limited to:
• loss of current customers and business partners, including the termination of operational agreements for the joint operation of services with other competitors.
• restrictions on the execution of our business strategy and plans, and our ability to respond to market trends and industry developments.
• we may incur significant costs, including legal, accounting and financial advisory fees in connection with the Merger.
• the process of the merger may divert our management’s attention and resources from our ongoing business and strategic opportunity.
• We could be subject to costly litigation in connection with the Merger.
• Our current and prospective employees may be uncertain about their future roles and relationships with us following the completion of the Merger, which may adversely affect our ability to attract and retain key personnel and which could result in work unrest, strikes, and other organizational measures that our unionized employees could take, which could adversely affect our results of operation.
• The Merger may expose us to media attention and public scrutiny which may have a general negative impact on our relationships with our employees, customers, suppliers and other business partners.
14
Our obligation to pay a termination fee under
certain circumstances and the restrictions on our ability to solicit or engage in negotiations with respect to other potential acquisition
proposals may discourage other potential transactions that may be favorable to our shareholders.
Until the Merger is completed or the Merger Agreement is terminated, with limited
exceptions, the Merger Agreement prohibits us, our subsidiaries and their respective representatives from soliciting alternative acquisition
proposals from third parties or providing information to or participating in discussions or negotiations with third parties regarding
alternative acquisition proposals. In addition, if we terminate the Merger Agreement in order to enter into a written definitive agreement
with respect to a superior proposal, or if we engage in such a transaction within 18 months following the termination of the agreement
because the Merger Agreement did not close by the Outside Date, we will be required to pay to Parent a termination fee of $150 million.
Our shareholders could file claims challenging
the Merger, which may delay or prevent the closing of the Merger and may cause us to incur substantial defense or settlement costs, or
otherwise adversely affect us
As of the date of this annual report, there are no pending lawsuits challenging the
Merger. However, securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered
into acquisition, Merger or other business combination agreements like the Merger agreement. Even if such a lawsuit is without merit,
defending against these claims can result in substantial costs and divert management time and resources. This risk increases if a U.S.
court determines that the forum selection clause in our articles of association is unenforceable in a lawsuit involving Israeli law claims,
as this could lead to such claims being litigated in U.S. courts, substantially increasing the costs and complexity of the proceedings.
An adverse judgment could result in monetary damages, which could have a negative impact on Parent’s and our respective liquidity
and financial condition. Lawsuits that may be brought against Hapag-Lloyd AG, us or our respective directors could also seek, among other
things, injunctive relief or other equitable relief, including a request to rescind parts of the Merger agreement already implemented
and to otherwise enjoin the parties from consummating the Merger. Such litigation, if not resolved, could prevent or delay completion
of the Merger and result in substantial costs to the Company, including any costs associated with the indemnification of directors and
officers. One of the conditions to the Closing is the absence of any condition, objection, order, injunction, decree, judgment or ruling
imposing a Burdensome Condition (as defined in the Merger Agreement). Therefore, if a plaintiff were successful in obtaining an injunction
prohibiting the consummation of the Merger on the agreed-upon terms, then such injunction may prevent the Merger from being completed,
or from being completed within the expected timeframe. The defense or settlement of any lawsuit or claim that remains unresolved at the
time the Merger is completed may adversely affect our business, financial conditions, results of operations and cash flows.
Our management and employees may have interests
that may be different from, or in addition to, the interests of our shareholders.
Our managers and employees may have interests in the transaction contemplated by the
Merger Agreement that may be different from, or in addition to, those of our shareholders. These interests include, among other things,
the right to accelerate vesting of equity awards, the indemnification and insurance and certain payments and benefits provisions contained
in or permitted by the Merger Agreement. Our current management and employees may be uncertain about their future roles and relationships
with us following the completion of the Merger, and as a result, we are experiencing labor interruptions as a result of disagreements
between management and unionized employees. If such disagreements persist or more disagreements arise and are not resolved in a timely
and cost-effective manner, such labor conflicts could have a material adverse effect on our business and financial results. Disputes with
our unionized employees may result in work stoppage, strikes and time-consuming litigation. In addition, we may not be able to attract
and retain key personnel during the pendency of the Merger.
Even if completed, the Merger may not be successful,
and the anticipated benefits of the Merger will not be realized, which could adversely affect the combined company’s business.
The success of the Merger will depend, in large part, on the ability of the combined
company to successfully integrate our operations with Hapag-Lloyd AG and to realize the anticipated benefits from the combination. There
can be no assurance that the integration will be successful or that any of the anticipated benefits of the Merger will be realized in
full, or at all. If the Merger is completed, our shareholders will cease to have any equity interest in our company and will no longer
participate in our future earnings or growth. Upon completion, Hapag-Lloyd AG may implement significant changes to our management, business
strategy, and operations. The strategic plans of Hapag-Lloyd AG may differ from our current plans and could result in changes to our business
model, the divestiture of certain assets, or a shift in our corporate culture, any of which could have a material impact on our business
and employees.
15
Certain of our customers and suppliers may terminate or alter their engagement with
us due to the change of control.
If the combined company is not able to successfully manage the integration process,
or if the anticipated benefits and synergies of the Merger are not realized, the business, financial condition, and results of operations
of the combined company could be materially and adversely affected.
Completion of the Merger may trigger change-in-control
or other provisions in certain agreements to which we are a party.
The completion of the Merger may trigger change-in-control or other provisions in
certain agreements to which we are a party. If we or Hapag-Lloyd AG are unable to negotiate waivers of those provisions, the counterparties
may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even
if we or Hapag-Lloyd AG are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the
agreements on terms less favorable to us.
Risks related to our business and our industry
We predominantly operate in the container segment
of the shipping industry, and the container shipping industry is dynamic and volatile.
Our principal operations are in the container shipping market and we are significantly
dependent on conditions in this market, which are for the most part beyond our control. For example, our results in any given period are
substantially impacted by supply and demand in the container shipping market, which impacts freight rates, bunker prices, and the prices
we pay under the charters for our vessels. Unlike some of our competitors, we do not own any ports or similar ancillary assets. Due to
our relative lack of diversification, an adverse development in the container shipping industry would have a significant impact on our
financial condition and results of operations.
The container shipping industry is dynamic and volatile and has been marked in recent
years by instability and uncertainties as a result of global geopolitical and economic crises and the many conditions and factors that
affect supply and demand in the shipping industry, which include:
• global and regional economic and geopolitical trends, including armed conflicts, such as between the U.S. and Venezuela, in the Middle East between the U.S. and Iran, Israel and Iran and Iranian backed proxies including Hamas and Hizbullah, between Russia and Ukraine, terrorist activities such as the Houthi rebel continued attacks on the Red Sea, embargoes, strikes, trade wars, recession, inflation rates and potentially, climbing interest rates;
• the global supply and demand for commodities and industrial products and in certain key markets, such as China;
• developments or disturbances in international trade, including the imposition of tariffs, changes to trade agreements and other trade protectionism (for example, in the U.S.-China trade) and possible trade wars;
• currency exchange rates;
• prices of energy resources, including vessel fuels and marine LNG;
• environmental and other regulatory developments;
• changes in seaborne and other transportation patterns;
• changes in the shipping industry, including mergers and acquisitions, bankruptcies, restructurings and shifting of alliances;
• changes in the infrastructure and capabilities of canals, ports and terminals;
• weather conditions;
• outbreaks of diseases; and
• development of digital platforms to manage operations and customer relations, including billing and services.
16
As a result of some of these factors, including cyclical fluctuations in demand and
supply, container shipping companies have experienced volatility in freight rates. For example, on January 1, 2025, the comprehensive
Shanghai (Export) Containerized Freight Index (SCFI) started with 2,505 points, then dropped to 1,300 points on April 1, 2025, increased
again to 2,000 points on June 1, 2025 and dropped back to 1,400 on December 31, 2025. Freight rates trends may change depending on future
supply and demand curves, bottlenecks around the world and other factors. Furthermore, rates within the charter market, through which
we source most of our capacity, may fluctuate significantly based upon changes in supply and demand for shipping services. Charter hire
rates in 2025 have moderately increased with similar charter periods on average compared to 2024. See below “– We charter-in
most of our fleet, which makes us more sensitive to availability of vessels and fluctuations in the charter rates, therefore some of the
costs associated with our future chartering of vessels are unpredictable.”
As global trends continue to change, it remains difficult to predict their impact
on the container shipping industry and on our business. If we are unable to adequately predict and respond to market changes, they could
have a material adverse effect on our business, financial condition, results of operations and liquidity.
Global economic downturns and geopolitical
challenges throughout the world could have a material adverse effect on our business, financial condition and results of operations.
Our business and operating results have been, and will continue to be, affected by
worldwide and regional economic and geopolitical challenges, including global economic downturns. In particular, the outbreak of the war
between Israel and Hamas and subsequently between Israel and Iran and other Iranian-backed proxies (such as Hezbollah in Lebanon and Houthi
rebels in Yemen), the military tensions between the U.S., Venezuela and Iran and the political and economic instability and unpredictability
in the Middle East, may adversely affect our business operations as an Israeli-based company. See also risk factor below “–
We are incorporated and based in Israel and, therefore, our results may be adversely affected by political, economic and military instability
in Israel and the Middle East. Specifically, the current military tensions between the U.S. and Iran, Israel and Iran and Iranian-backed
proxies as well as the military tensions between Israel and Hamas after the ceasefire in October 2025 may adversely affect our business.”
Furthermore, since October 2023, the Iranian-linked Houthis in Yemen have been persistently
launching attacks against vessels sailing in the Red Sea crossing the Bab-El-Mandeb straits, threatening vessels entering the Red Sea,
causing cargo flow disruptions and disrupting global shipping, while particularly threatening Israeli owned or related vessels, or vessels
calling Israeli ports. In response, and similarly to other carriers, we have taken proactive measures by re-routing some of our vessels
and restructuring our services on the Indian subcontinent to the East Mediterranean trade, affecting global supply chain with longer voyage
schedules and higher costs of operations. Plans to resume maritime routes through the Red Sea by certain carries have not yet fully materialized,
and the situation remains volatile and unpredictable. Any development or escalation of this situation may have an adverse effect on our
business operations and financial results.
The current military conflicts in the Middle East, the tension between the U.S. and
Iran, between Russia and Ukraine, and any current and possible future conflicts or escalations thereof may further adversely affect the
global supply chain and the maritime shipping industry and lead to a decline in the financial markets or a rise in energy prices. The
ongoing conflicts also impede the global flow of goods, which could result in product and food shortages, harm economic growth and place
more pressure on inflation. Furthermore, freight movement and supply chains in the Red Sea, Ukraine and neighboring countries have been,
and may continue to be, significantly disrupted. Economic sanctions levied on Russia, Iran, Hamas and its leaders and on Russian oil and
oil products may cause further global economic downturns, including additional increases in bunker costs. A further deterioration of the
current conflicts or other geopolitical instabilities may cause global markets to plummet, affect global trade, increase bunker prices
and may have a material adverse effect on our business, financial condition, results of operations and liquidity.
Currently, global demand for container shipping is highly volatile across regions
and remains subject to downside risks stemming mainly from factors such as reduction in consumption, geopolitical conditions, risk of
global economic recession, changes to trade policies and new tariffs, potential increase of interest rates, threat of pandemics,
severe hits to the gross domestic product (GDP) growth of both advanced and developing countries, fiscal fragility in advanced economies,
high sovereign debt levels, highly accommodative macroeconomic policies and persistent difficulties accessing credit.
According to a report by the International Monetary Fund (IMF), as of January 2026,
global GDP growth is expected to remain stable at 3.2% in 2026, similarly to 2025. Global headline inflation is expected to decline to
3.8% in 2026 and 3.4% in 2027. Geopolitical trends and economic downturns may decrease global growth and increase inflation more than
currently expected. The recent deterioration in the global economy has caused, and may continue to cause, volatility or a decrease in
worldwide demand for certain goods shipped in containerized form. In particular, if growth in the regions in which we conduct significant
operations, including the United States, Asia and the Black Sea, Europe and Mediterranean regions, slows for a prolonged period and/or
there is significant additional deterioration in the global economy, such conditions could have a material adverse effect on our business,
financial condition, results of operations and liquidity.
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Uncertainty in the global economy, possible recent events such as changes to U.S.
international trade agreements, greater restrictions on free trade and significant increases in tariffs on goods imported into the United
States, may lead to fewer goods transported and the need to restructure certain terms of business with our suppliers or customers. During
2025, the U.S. government altered its approach to international trade policy and in some cases renegotiated certain existing bilateral
or multi-lateral trade agreements and treaties with other countries. Some foreign governments, including China, have instituted retaliatory
tariffs on certain U.S. goods and have indicated their willingness to impose additional tariffs on U.S. products. In May 2025 China and
the U.S. have reached an agreement which reduced the tariffs to roughly 30% (depending on the imported products), however trade tensions
still ensue. Furthermore, a recent U.S. Supreme Court ruling determined that certain tariffs imposed by President Trump pursuant to the
International Emergency Economic Powers Act are invalid, adding uncertainty and confusion to the business environment. See “—A
decrease in the level of China’s export of goods could have a material adverse effect on our business.” A significant portion
of our containers and chartered vessels are manufactured in China. Global trade disruption, introductions of new trade barriers and bilateral
trade frictions, together with any future downturns in the global economy resulting therefrom, could adversely affect our business, financial
condition and results of operations.
If these or other global conditions continue to deteriorate during 2026, global growth
may take another downturn and demand in the shipping industry may decrease. Geopolitical challenges, including political crises and military
conflicts, trade wars, weather and natural disasters, embargoes and canal closures could also have a material adverse effect on our business,
financial condition and results of operations.
In addition, under weak economic conditions or global recession, our customers and
suppliers would experience deterioration of their businesses, cash flow shortages and/or difficulty in obtaining financing due to, amongst
other causes, an increase in interest rates. As a result, our existing or potential customers and suppliers may delay or cancel plans
to purchase our services or may be unable to fulfil their obligations to us in a timely fashion.
A decrease in the level of China’s export
of goods could have a material adverse effect on our business.
Although we also operate in many other countries in Asia, a significant portion of
our business originates from China and therefore depends on the level of imports and exports to and from China. Trade tensions between
the U.S. and China have intensified in recent years, reduced bilateral trade between the U.S. and China and led to shifts in trade
structure and reductions in container trade. Particularly, recent U.S. tariffs imposed or threatened to be imposed on China may cause
a decrease in exports from China to the U.S. and an increase in costs associated with such exports, which may materially and adversely
affect our business, financial condition and results of operations. For more information on the risks related to U.S./China trade
restrictions, see “– Our business may be adversely affected by trade protectionism in the markets that we serve, particularly
in China.” Furthermore, as China exports considerably more goods than it imports, any reduction in or hindrance to China-based exports,
whether due to trade restrictions, decreased demand from the rest of the world, an economic slowdown in China, seasonal decrease in manufacturing
levels due to the Chinese New Year holiday, factory shutdowns due to pandemics or other factors, could have a material adverse effect
on our business. For instance, in recent years the Chinese government has implemented economic policies aimed at increasing domestic consumption
of Chinese-made goods and national security measures for Hong Kong which may have the effect of reducing the supply of goods available
for export and may, in turn, result in decreased demand for cargo shipping. In recent years, China has experienced an increasing
level of economic autonomy and a gradual shift toward a “market economy” and enterprise reform. However, many of the reforms
implemented, particularly some price limit reforms, are unprecedented or experimental and may be subject to revision, change or abolition.
The level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government,
as well as by changes in political, economic and social conditions, or other relevant policies of the Chinese government. Geopolitical
tensions and changing trade policies may also affect the volume and the geographic scope of exports from China. Changes in laws and regulations,
including with regard to tax matters, and their implementation by local authorities could affect our vessels calling on Chinese ports
and could have a material adverse effect on our business, financial condition and results of operations.
18
Imbalance between supply of global container ship capacity and demand
may limit our ability to operate our vessels profitably.
According to Alphaliner, as of December 31, 2025, global container ship capacity was approximately 33.3
million TEUs, spread across approximately 6,700 vessels. Global container ship capacity is expected to increase by 3.7% in 2026, which
is significantly lower than the growth rate of 7.3% in 2025 and growth rate of 10.3% in 2024. The expected vessels deliveries during
2026 is 1.4 million TEUs out of a total vessels order book of 11.3 million TEU, while demand for shipping services is projected to increase
by only 2.5%, (slightly lower than the growth in demand of 3.5% in 2025), therefore the increase in vessel capacity is expected to continue
to be higher than the increase in demand for container shipping.
We endeavor to adapt our vessel fleet capacity to the supply and demand trends.
As of December 31, 2025, we operated 128 vessels. Responses to changes in market conditions may be slower as a result of the time required
to build new vessels and adapt to market needs and due to shortage of vessels in the charter market, or, on the opposite, to terminate
charter agreements earlier than expected. As shipping companies purchase vessels years in advance of their actual use to address expected
demand, vessels may be delivered during times of decreased demand (or oversupply if other carriers act in kind) or unavailable during
times of increased demand, leading to a supply/demand mismatch. The container shipping industry may face oversupply in the coming years
and numerous other factors beyond our control may also contribute to increased capacity, including deliveries of new, refurbished or converted
vessels, the possible full reopening of the Suez Canal, port and canal congestion, any change in the practice of slow steaming,
a reduction in the number of void voyages and a decrease in the number of vessels that are out of service (e.g., vessels that are laid-up,
drydocked, or are otherwise not available for hire), as well as decreased scrapping levels of older vessels. In the event of overcapacity,
there is no guarantee that measures of blank sailings and redelivery of chartered vessels will prove successful, partially or at all in
mitigating the gap between excess supply and demand. Excess capacity generally depresses freight rates and can lead to lower utilization
of vessels, which may adversely affect our revenues and costs of operations, profitability and asset values.
Access to ports and canals could be limited
or unavailable, including due to geopolitical events, weather and climate conditions, congestion in terminals and inland supply chains,
and we may incur additional costs as a result thereof.
Global development of new terminals continues to be outpaced by the increase in demand.
In addition, the increasing vessel size of containership newbuilding has forced adjustments to be made to existing container terminals.
As such, existing terminals are coping with high berth utilization and space limitations of stacking yards, which are at near-full capacity.
This results in longer cargo operations times for the vessels and port congestion, which could increase operating expenses and have a
material adverse effect on affected shipping lines. Decisions about container terminal expansion and port access are made by national
or local governments and are outside of our control. Such decisions are based on local policies, priorities and concerns and the interests
of the container shipping industry may not be considered.
Our access to ports may also be limited or unavailable due to other reasons. As industry
capacity and demand for container shipping continue to grow, we may have difficulty in securing sufficient berthing windows to expand
our operations in accordance with our growth strategy, due to the limited availability of terminal facilities. Further, we do not own
or hold any substantial investments in ports, terminals or related facilities which could further increase this risk, especially in cases
of express or expedited services that we operate, which depend on our ability to secure favorable berthing windows that facilitate the
flow of the carried cargo along the supply chain. In addition to ports, our access to canal transit may be restricted due to various reasons,
including weather conditions such as the worsening drought conditions in the Panama Canal or the Yemeni Houthis’ continued attacks
on vessels in the Red Sea headed to the Suez Canal. If canal transit remains restricted or inaccessible altogether, we will be required
to limit the number of vessels in the canals or re-route our vessels altogether, which is expected to increase our operating expenses
and may have a material adverse effect on our business, financial condition and results of operations.
Our status as an Israeli company has limited, and may continue to limit, our ability
to call on certain ports. For example, in August 2025 we received a notice from the Turkish Port Authorities through our local agent that
vessels owned, managed or operated by an entity related to Israel will not be permitted to berth in Turkish ports due to a new regulation
adopted with an immediate effect, causing us to reroute our vessels and develop a mitigating plan which reduced the potential adverse
effects of this regulation. Prior to that, in December 2023, the Malaysian government announced its decision to prohibit us from docking
at any Malaysian port in response to the Israel-Hamas war. Furthermore, major ports may close for long periods of time due to maintenance,
natural disasters, strikes, pandemics, or other reasons beyond our control. Ports and terminals may implement certain measures such as
dwell-time fees or similar charges applied against containers that remain in the terminal longer than the specified number of days, as
well as work procedures intended to relieve congestion which may also limit our access to terminals and apply additional costs to us or
to our customers. These and other measures may be imposed in additional ports and terminals in other geographical areas, and we may not
be able to recover or mitigate the additional costs by applying similar charges on our customers. Congestion, economic trends and geopolitical
events may place pressure on terminals to increase their services rates, thereby increasing our operating expenses. We cannot ensure that
our efforts to secure sufficient port access will be successful. Any of these factors may have a material adverse effect on our business,
financial condition and results of operations.
19
Our business may be adversely affected by trade and local maritime
carriers’ protectionism in the markets that we serve.
Our operations are exposed to the risk of increased trade protectionism. Governments
may use trade barriers in an effort to protect their domestic industries against foreign imports, thereby further depressing demand for
container shipping services. In recent years, increased trade protectionism in the markets that we access and serve, particularly
in China, where a significant portion of our business originates, has caused, and may continue to cause, increases in the cost of goods
exported and the risks associated with exporting goods as well as a decrease and volatility in the quantity of goods shipped. In November 2020,
China and an additional 15 countries in the Asia-Pacific region entered into the largest free trade pact, the RCEP Regional Comprehensive
Economic Partnership, which is expected to strengthen China’s position on trade protectionism related matters. China’s import
and export of goods may continue to be affected by trade protectionism, specifically the ongoing U.S.-China trade tensions, which has
been characterized by escalating trade barriers between the U.S. and China as well as trade relations among other countries. See “
– A decrease in the level of China’s export of goods could have a material adverse effect on our business.” These risks
may have a direct impact on demand in the container shipping industry. As tensions between China and the U.S. continue, there is
no assurance that further escalation will be avoided or that current tensions will not be exacerbated.
The current U.S. administration has advocated greater restrictions on trade generally
and significant increases on tariffs on certain goods imported into the United States from certain trade partners, and has taken steps
toward restricting trade in certain goods. China and other countries have retaliated in response to new trade policies, treaties and tariffs
implemented by the United States to such trade partners. The Recent U.S. Supreme Court ruling invalidating certain tariffs imposed by
President Trump further adds uncertainty to the business environment. See “-Global economic downturns and geopolitical challenges
throughout the world could have a material adverse effect on our business, financial condition and results of operations”. Such
trade escalations have had, and may continue to have, an adverse effect on manufacturing levels, trade levels and specifically, may cause
an increase in the cost of goods exported from, and the risks associated with, exporting goods from a country or region subject to tariffs.
Such increases may also affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs.
Further, increased tensions may adversely affect oil demand, which would have an adverse effect on shipping rates. They could also result
in an increased number of vessels sailing from a country or region with less than their full capacity being met. These restrictions may
encourage local production over foreign trade which may, in turn, affect the demand for maritime shipping. In addition, there is uncertainty
regarding further trade agreements (such as with the EU), trade barriers or restrictions on trade in the United States. In addition, certain
governments recently introduced legislation which would provide an advantage to local and national industry participants over foreign-based
carriers, and if this legislative trend continues or increases, it could obstruct or impede the provision of our services in certain jurisdictions.
See also – “The shipping industry is subject to extensive government regulation and standards, international treaties and
trade prohibitions and sanctions.” Any increased trade barriers
or restrictions on trade may affect the global demand for our services and could have a material adverse effect on our business, financial
condition and results of operations.
Changing trading patterns, trade flows and
sharpening trade imbalances may adversely affect our business, financial condition and results of operations.
Our TEUs carried can vary depending on the balance of trade flows between different
world regions. For each service we operate, we measure the utilization of a vessel on the “strong,” or dominant, leg, as well
as on the “weak,” or counter-dominant, leg by dividing the actual number of TEUs carried on a vessel by the vessel’s
effective capacity. Utilization per voyage is generally higher when transporting cargo from net export regions to net import regions (the
dominant leg). Considerable expenses may result when empty containers must be transported on the counter-dominant leg. We seek to manage
the container repositioning costs that arise from the imbalance between the volume of cargo carried in each direction by utilizing our
global network to increase cargo on the counter-dominant leg and by triangulating our land transportation activities and services. If
we are unable to successfully match demand for container capacity with available capacity in nearby locations, we may incur significant
balancing costs to reposition our containers in other areas where there is demand for capacity. It is not guaranteed that we will always
be successful in minimizing the costs resulting from the counter-dominant leg trade, which could have a material adverse effect on our
business, financial condition and results of operations. Furthermore, sharpening imbalances in world trade patterns — rising
trade deficits of net import regions in relation to net export regions — may exacerbate imbalances between the dominant and
counter-dominant legs of our services. This could have a material adverse effect on our business, financial condition and results of operations.
20
Our ability to participate in operational partnerships
in the shipping industry is limited, and may be further reduced by recent regulatory changes or in the event of a change of our control,
which may adversely affect our business.
The container shipping industry has historically experienced a reduction in the number
of major carriers and the termination and reformation of strategic alliances and partnerships among container carriers and this trend
may continue in the future. Past consolidation in the industry has affected the existing strategic alliances between shipping companies.
For example, the Ocean Three alliance, which consisted of CMA CGM, S.A. (CMA CGM), United Arab Shipping Company and China Shipping Container
Lines, was terminated in 2019 and replaced by the Ocean Alliance, consisting of COSCO Shipping Group (including China Ocean Shipping Company
(COSCO), and Orient Overseas Container Line Limited (OOCL)), CMA CGM Shipping Group (including American President Lines, LLC) and Evergreen
Marine Corporation. In January 2025, the 2M Alliance, which included MSC and Maersk Group, was terminated and in February 2025, Maersk
and Hapag-Lloyd AG (Hapag-Lloyd) launched the new Gemini Alliance, resulting in Hapag-Lloyd leaving the THE Alliance (subsequently renamed
the Premier Alliance) which currently includes ONE, HMM and Yang Ming Marine Transport Corporation (Yang Ming).
We are currently not a party to any strategic alliances and therefore have not been
able to achieve the benefits associated with being a member of such an alliance. If, in the future, we would like to enter into a strategic
alliance but are unable to do so, we may be unable to achieve the cost and other synergies that can result from such alliances. However,
we are a party to operational partnerships with other carriers in some of the trade zones in which we operate, including a strategic operational
agreement with MSC on the Asia-U.S. East Coast and Asia-U.S. Gulf Coast trades. In addition, we are a party to additional operational
agreements with MSC on other trades. See “Item 4.B – Business Overview – Our operational partnerships.” We may
seek to enter into additional operational partnerships or similar arrangements with other shipping companies or local operators, partners
or agents. The Merger Agreement with Hapag-Lloyd AG may further restrict our ability to enter into new operational agreement or alliances.
The unilateral termination of our existing operational agreements either by MSC or by other partners, or of any future cooperation agreement
we may enter into, could adversely affect our business, financial condition and results of operations.
These strategic cooperation agreements and other arrangements, if we choose to enter
into them with other carriers, could also reduce our flexibility in decision making in the covered trade zones, and we are subject to
the risk that the expected benefits of the agreements may not materialize. Furthermore, in other trade zones in which other alliances
operate, we are still unable to benefit from the economies of scale that many of our competitors are able to achieve through participation
in strategic arrangements (i.e., strategic alliances or operational agreements). Our status as an Israeli company has limited, and may
continue to limit, our ability to call on certain ports and has therefore limited, and may continue to limit, our ability to enter into
alliances or operational partnerships with certain shipping companies. We also rely on applicable competition and antitrust regulation
exemptions in order to enter into operational agreements in various jurisdictions and with other carriers. Restrictive regulatory frameworks
in the relevant jurisdictions, including the revocation of applicable block exemptions for operational agreements such as the previous
European Consortia Block Exemption Regulation (CBER), may adversely affect our ability to engage in these types of partnerships in the
future. See also “—We are subject to competition and antitrust regulations in the countries where we operate, have been subject
to antitrust investigations by competition authorities in the past and may be subject to antitrust investigations in the future. The revocation
of these exemptions could negatively affect our business and ability to conduct our business. If we are not successful in expanding or
entering into additional operational partnerships which are beneficial to us, this could adversely affect our business.”
Public health crises, such as a major epidemic
or pandemic, have in the past and may in the future create significant business disruptions, cause fluctuations in supply and demand,
and adversely affect our business, financial condition and results of operations.
We are subject to the risk of public health crises, including epidemics or pandemics.
For example, the COVID-19 pandemic previously significantly impacted our business, financial condition and results of operations. The
COVID-19 pandemic resulted in reduced industrial activity in various countries around the world, with temporary closures of factories
and other facilities such as port terminals, which led to a temporary decrease in supply of goods and congestion in warehouses and terminals.
Government-mandated shutdowns in various countries also temporarily decreased consumption of goods, negatively affecting trade volumes
and the shipping industry globally during the first half of 2020.
If another pandemic, including a resurgence of COVID-19, were to erupt, we may face
risks to our personnel and operations. Such risks would include delays in the loading and discharging of cargo on or from our vessels
due to severe congestion at ports and inland supply chains, difficulties in carrying out crew changes, off hire time due to quarantine
regulations, delays and expenses in finding substitute crew members if any of our vessels’ crew members become infected, delays
in drydocking if insufficient shipyard personnel are working due to quarantines or travel restrictions, difficulties in procuring new
containers due to temporary factories’ shutdowns and increased risk of cyber-security threats due to our employees working remotely.
Fear of the virus and the efforts to prevent its spread may increase pressure on the supply-demand balance, which could also put financial
pressure on our customers and increase the credit risk that we face in respect of some of them. Such events have affected our operations
in the past and any future outbreak of a major epidemic or pandemic would have a material adverse effect on our business, financial condition
and results of operations.
21
The container shipping industry is highly competitive
and competition may intensify even further, which could negatively affect our market position and financial performance.
We compete with a large number of global, regional and niche container shipping companies,
including, for example, MSC, Maersk, COSCO, CMA CGM, Hapag-Lloyd, ONE and Yang Ming, to provide transport services to customers worldwide.
In each of our key trades, we compete primarily with global container shipping companies. The cargo shipping industry is highly competitive,
with the top three carriers in terms of global capacity — MSC, Maersk and CMA CGM — accounting for approximately 47.8% of
global capacity, and the remaining carriers together contributing approximately 52.2% of global capacity as of December 2025, according
to Alphaliner. Certain of our large competitors may be better positioned and have greater financial resources than us and may therefore
be able to offer more attractive schedules, services and rates. Some of these competitors operate larger fleets with larger vessels and
with higher vessel ownership levels than us and may be able to gain market share by supplying their services at aggressively lower freight
rates for a sustained period of time. In addition, mergers and acquisition activities within the container shipping industry have
further concentrated global capacity with certain of our competitors. See “– Our ability to participate in operational partnerships
in the shipping industry is limited, which may adversely affect our business.” If one or more of our competitors expands its market
share through an acquisition or secures a better position in an attractive niche market in which we operate or intend to enter, we could
lose market share as a result of increased competition, which in turn could have a material adverse effect on our business, financial
condition and results of operations.
We may be unable to retain existing customers
or may be unable to attract new customers.
Our continued success requires us to maintain our current customers and develop new
relationships. We cannot guarantee that our customers will continue to use our services in the future or at the current level. We may
be unable to maintain or expand our relationships with existing customers or to obtain new customers on a profitable basis due to competitive
dynamics, especially in periods of market downturn. In addition, as some of our customer contracts are longer-term in nature (up to one
year), if market freight rates increase, we may not be able to adjust the contractually agreed rates to capitalize on such increased freight
rates until the existing contracts expire, while if freight rates decline below the agreed contract terms we may face pressure from our
customers to adjust the contract rates to the prevailing market rates. Upon the expiration of our existing contracts, we cannot assure
you that our customers will renew the contracts on favorable terms, or if at all, or that we will be able to attract new customers. Any
adverse effect would be exacerbated if we lose one or more of our significant customers. In 2025, our 10 largest customers represented
approximately 12% of our freight revenues and our 50 largest customers represented approximately 27% of our freight revenues. Although
we believe we currently have a diversified customer base, and we invest efforts to maintain such diversification, we may become dependent
upon a few key customers in the future, especially in particular trades, such that we would generate a significant portion of our revenue
from a relatively small number of customers. The Merger Agreement with Hapag-Lloyd may further increase this risk. Any inability to retain
or replace our existing customers may have a material adverse effect on our business, financial condition, and results of operations.
Technological developments which affect global
trade flows and supply chains are challenging some of our largest customers and may therefore affect our business and results of operations.
By reducing the cost of labor through automation and digitization, including by means
of new technologies in artificial intelligence and machine learning, among others, and empowering consumers to demand goods whenever and
wherever they choose, technology is changing the business models and production of goods in many industries, including those of some of
our largest customers. Consequently, supply chains are being pulled closer to the end-customer and are required to be more responsive
to changing demand patterns. As a result, fewer intermediate and raw inputs are traded, which could lead to a decrease in shipping activity.
If automation and digitization become more commercially viable and/or production becomes more regional or local, total containerized trade
volumes would decrease, which would adversely affect demand for our services. Supply chain disruptions caused by geopolitical and economic
events, pandemics, rising tariff barriers and environmental concerns also accelerate these trends.
We rely on third-party contractors and suppliers,
as well as our partners and agents, to provide various products and services and unsatisfactory or faulty performance of our contractors,
suppliers, partners or agents could have a material adverse effect on our business.
We engage third-party contractors, partners and agents to provide services in connection
with our business. An important example is our chartering-in of vessels from ship owners, whereby the ship owner is obligated to provide
the vessel’s crew, insurance and maintenance along with the vessel. Another example is our carriers partners whom we rely on for
their vessels and service to deliver cargo to our customers, as well as third party agencies who serve as our local agents in specific
locations. Disruptions caused by third-party contractors, partners and agents could materially and adversely affect our operations and
reputation.
22
Additionally, a work stoppage at any one of our suppliers, including our land transportation
suppliers, could materially and adversely affect our operations if an alternative source of supply were not readily available. Also, we
outsource part of our back-office functions to a third-party contractor. The back-office support center may shut down due to various reasons
beyond our control, which could have an adverse effect on our business. There can be no assurance that the products delivered and services
rendered by our third-party contractors and suppliers will be satisfactory and match the required quality levels. Furthermore, major contractors
or suppliers may experience financial or other difficulties, such as natural disasters, terror attacks, failure of information technology
systems or labor stoppages, which could affect their ability to perform their contractual obligations to us, either on time or at all.
Any delay or failure of our contractors or suppliers to perform their contractual obligations to us could have a material adverse effect
on our business, financial condition, results of operations and liquidity.
A shortage of qualified sea and shoreside personnel
could have an adverse effect on our business and financial condition.
Our success depends, in large part, upon our ability to attract and retain highly
skilled and qualified personnel, particularly seamen and coast workers who deal directly with activities related to vessel operation and
sailing. In crewing our vessels, we require professional and technically skilled employees with specialized training who can perform physically
demanding work on board our vessels. As the worldwide container ship fleet continues to grow, the demand for skilled personnel has been
increasing, which has led to a shortfall of such personnel. An inability to attract and retain qualified personnel as needed could materially
impair our ability to operate, or increase our costs of operations, which could adversely affect our business, financial condition, results
of operations and liquidity. Furthermore, the shipping industry as a whole or in part may experience difficulties in carrying out crew
changes in the event of future pandemic outbreaks, which could impede our ability to employ qualified personnel. The Merger Agreement
we entered into with Hapag-Lloyd AG further increases this risk.
Risks related to operating our vessel fleet
We charter-in most of our fleet, which makes
us more sensitive to fluctuations in the charter market, and as a result of our dependency on the vessel charter market, therefore some
of the costs associated with our future chartering of vessels are unpredictable.
We charter-in most of our fleet. As of December 31, 2025, of the 128 vessels through
which we provide transport services globally, 112 are chartered (accounted as right-of-use assets under the accounting guidance of IFRS
16), which represents 87.5% of our fleet, a percentage of chartered vessels that is significantly higher than the industry average of
37.6% (according to Alphaliner). Any rise in charter hire rates could adversely affect our results of operations.
While there have been fluctuations in the demand in the container shipping market,
during 2025, charter demand remained very high for most vessel sizes, leading to an imbalance in supply and demand and a general shortage
of vessels, including of vessels over 4,250 TEU available for hire, increased charter rates and longer charter periods dictated by owners.
See “Item 4.B – Business Overview – Our vessel fleet.”
We are a party to a number of other long-term charter agreements and may enter into additional long-term
agreements based on our assessment of current and future market conditions and trends. As of December 31, 2025, 85.7% of our chartered-in
vessels (or 91.5% in terms of TEU capacity for container vessels) have a remaining charter period that exceeds one year, and we may be
unable to take full advantage of short-term reductions in charter hire rates with respect to such longer-term charters. In addition, in
the future we may substitute a short-term charter of one year or less with a long-term charter exceeding one year, which could cause our
costs to increase quickly compared to competitors with longer-term charters or owned vessels. To the extent we replace vessels that are
chartered-in under short-term leases with vessels that are chartered-in under long-term leases or that are owned by us, the principal
amount of our long-term contractual obligations would increase. There can be no assurance that the terms of any such long-term leases
will be favorable to us in the long run.
23
We may face difficulties in chartering or owning enough vessels
in the future, including large vessels, to support our growth strategy due to the possible shortage of vessel supply in the market.
Charter rates for container and car carrier vessels are volatile. If we are unable
in the future to charter vessels of the type and size needed to serve our customers efficiently on terms that are favorable to us, if
at all, this may have a material adverse effect on our business, financial condition, results of operations and liquidity. Furthermore,
container shipping companies have been incorporating, and are expected to continue to incorporate, larger, more economical vessels into
their operating fleets. The cost per TEU transported on large vessels is less than the cost per TEU for smaller vessels as, among other
factors, larger vessels provide increased capacity and fuel efficiency per carried TEU (assuming full vessel utilization). As a result,
carriers are encouraged to deploy large vessels, particularly within the more competitive trades. According to Alphaliner, vessels in
excess of 12,500 TEUs represented approximately 68% of the current global orderbook based on TEU capacity as of December 31, 2025, and
approximately 39% of the global fleet based on TEU capacity consists of vessels in excess of 12,500 TEUs as of December 31, 2025.
Furthermore, a significant introduction of large vessels, including very large vessels in excess of 18,000 TEUs, into any trade, will
enable the transfer of existing, large vessels to other shipping trades on which smaller vessels typically operate. Such transfer, which
is referred to as “fleet cascading,” may in turn generate similar effects in the smaller trades in which we operate.Other
than ten 15,000 TEU LNG dual-fuel container vessels we long-term charter from Seaspan Corporation which are considered in the industry
as large container vessels (see “Item 4.B – Business Overview – Our vessel fleet - Strategic Chartering Agreements”),
we do not currently have additional agreements in place to procure or charter-in large container vessels in excess of 12,500 TEU, and
the continued deployment of larger vessels by our competitors will adversely impact our competitiveness if we are not able to charter-in,
acquire or obtain financing for such vessels on attractive terms or at all. Additionally, our status as an Israeli company has limited,
and may continue to limit, our ability to charter vessels from certain vessel owners. This risk is further exacerbated as a result of
our difficulties faced in participating in certain alliances and thereby accessing larger vessels for deployment. Even if we are able
to acquire or charter-in larger vessels, we cannot assure you we will be able to achieve utilization of our vessels necessary to operate
such vessels profitably.
Rising energy and bunker prices (including LNG) may have an adverse
effect on our results of operations.
Fuel and energy expenses, in particular bunker expenses, represent a significant portion
of our operating expenses, accounting for 25.7%, 28.5% and 28.3% of our operating expenses and cost of services for the years ended December
31, 2025, 2024 and 2023, respectively. Bunker price moves in close interdependence with crude oil prices, which have historically exhibited
significant volatility. Crude oil prices are influenced by a host of economic and geopolitical factors that are beyond our control, particularly
the U.S. military operations in Venezuela and the ongoing military tensions between the U.S. and Iran, as well as economic developments
in emerging markets such as China and India, the U.S.-China trade tensions, the military conflicts in the Middle East, the Russian-Ukraine
conflict and sanctions enacted on seaborne imports of Russian crude oil and petroleum product, concerns related to the global recession
and financial turmoil, rising inflation, interest rates fluctuations, policies of the Organization of the Petroleum Exporting Countries
(OPEC) and other oil producing countries and production cuts, sanctions on Iran by the U.S. and others, consumption levels of other transportation
industries such as the aviation, rail and car industries, and ongoing political tensions and acts of terror in key production countries
such as Libya, Nigeria and Venezuela. Crude oil prices have decreased to levels at an annual average of $69 per barrel in 2025, compared
to $81 per barrel in 2024. Similarly, Very Low Sulfur Fuel Oil (VLSFO) decreased by 16% in 2025 compared to 2024 (based on prices in Singapore
according to Platts Market Data). Any further deterioration of geopolitical and economic factors may lead to an increase in bunker prices.
In accordance with our ESG strategy and strategic long-term charter agreements (See
“Item 4.B – Business Overview – Our vessel fleet – Strategic Chartering Agreements”), we currently operate
28 LNG dual fuel container vessels, with additional 10 LNG dual fuel container vessels expected to be delivered during 2027 and 2028.
In August 2022 we have announced the signing of a ten-year marine LNG sale and purchase agreement with Shell NA LNG, LLC, or Shell, to
supply LNG to our ten 15,000 TEU LNG vessels chartered from Seaspan, all delivered to date. In December 2024 we entered into a definitive
agreement to supply LNG to our 8,000 class TEU LNG vessels. In accordance with both agreements, Shell agreed to sell and deliver, and
we agreed to purchase and accept, LNG in quantities, quality, specifications, and prices as specified in the agreement. Each agreement
is for a period of ten years from the date of the first bunkering operation executed by the parties. These agreements may be terminated
with immediate effect by either party in the event of a material breach by the other party that has not been cured within 30 days of written
notice thereof. In March 2023 we announced the successful LNG bunkering of the first 15,000 TEU LNG dual fuel vessel delivered to us,
ZIM Sammy Ofer, in Kingston Freeport Terminal, Jamaica. The sale and purchase agreements described above were initially estimated
by us to be valued in aggregate at more than $1.7 billion for the duration of their respective ten-year terms. If these agreements are
terminated (due to a breach of either party), we may not be able to supply our LNG fueled vessels with enough of LNG fuel required for
their operation, and we will need to shift back to crude oil-based fuels, or alternatively, we may be required to buy LNG at the then
market terms, which could be on worse terms for us compared to the terms of our agreements with Shell. In addition, changes in the U.S.
LNG export policies may impact the availability of global LNG supply, and our ability to purchase LNG on market terms. Our operations
may be significantly affected by the supply and demand conditions of the LNG global trade market, and we may need to rely on other LNG
suppliers to supply LNG for our other LNG container vessels.
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In recent years, there has been a significant increase in environmental regulation
aimed to lower the levels of air polluting fuel consumption. For example, the IMO 2020 Regulations, in effect from January 1, 2020, require
all ships to burn fuel with a maximum sulfur content of 0.5%, which is a significant reduction from the previous threshold of 3.5%. In
addition, certain geographic regions were declared as Emission Control Areas (ECAs) under the MARPOL Convention, Annex VI and require
ships to burn fuel with a maximum sulfur content of 0.1% upon entry to territorial waters. As a result, we have implemented a New Bunker
Factor, or NBF, surcharge, in December 2019, intended to offset the additional costs associated with compliance with the IMO 2020 Regulations
and other applicable low sulfur requirements. See “Item 3.D – Risk factors – Climate change and GHG restrictions may
adversely affect our operating results.”
A rise in bunker prices (including LNG) could have a material adverse effect on our
business, financial condition, results of operations and liquidity. Historically and in line with industry practice, we have imposed from
time to time surcharges such as the NBF and New Emissions Factor, or NEF, over the base freight rate we charge to customers in part to
minimize our exposure to certain market-related risks, including bunker price adjustments. However, there can be no assurance that we
will be successful in passing on future price increases to customers in a timely manner, either for the full amount or at all.
Our bunker consumption is affected by various factors, including the number of vessels
being deployed, vessel capacity, pro forma speed, vessel efficiency, the weight of the cargo being transported, port efficiency and sea
conditions. We have implemented various optimization strategies designed to reduce bunker consumption, including operating vessels in
“super slow steaming” mode, trim optimization, hull and propeller redesigning, polishing and sailing rout optimization. Additionally,
we may sometimes manage part of our exposure to bunker price fluctuations by entering into hedging arrangements with reputable counterparties.
Our optimization strategies and hedging activities may not be successful in mitigating higher bunker costs, and any price protection provided
by hedging may be limited due to market conditions, such as choice of hedging instruments, and the fact that only a portion of our exposure
is hedged. There can be no assurance that our hedging arrangements, if taken, will be cost-effective, will provide sufficient protection,
if any, against rises in bunker prices or that our counterparties will be able to perform under our hedging arrangements.
As vessel owners we may incur additional costs
and liabilities for the operation of our vessel fleet.
Although we charter most of our fleet, we currently own sixteen vessels. In February
2024 we purchased five vessels in addition to nine vessels we previously owned, and in January and May 2025 we purchased two additional
8,500 TEU vessels, both of which were previously chartered to us. We may purchase additional vessels, depending on market terms and conditions
and on our operational needs. As a vessel owner we may incur additional costs due to maintenance and regulatory requirements, most of
them described in this Item 3.D and elsewhere of this Annual Report. In addition, we may incur additional insurance costs as a result
of operating our owned vessels in combat and unstable geographic zones. In addition, as vessel owners we may be exposed to higher risks
due to our responsibility to the crew and operational condition of the vessel. We intend to mitigate these vessel owner liability risks
by acquiring adequate insurance policy, however our insurance policy may not cover all or part of our costs. See also below “
– Our insurance may be insufficient to cover losses that may occur to our property or result from our operations”.
There are numerous risks related to the operation
of any sailing vessel and our inability to successfully respond to such risks could have a material adverse effect on us.
There are numerous risks related to the operation of any sailing vessel, including
dangers associated with potential marine disasters, operations in war zones, mechanical failures, collisions, lost or damaged cargo, poor
weather conditions (including severe weather events resulting from climate change), the content of the load, exceptional load (including
dangerous and hazardous cargo or cargo the transport of which could affect our reputation), meeting deadlines, risks of documentation,
maintenance and the quality of fuel, terrorist attacks and piracy. For example, we incurred expenses of $30.5 million in respect of claims
and demands for lost and damaged cargo, vessels and war risks for the year ended December 31, 2025. Such claims are typically insured
and our deductibles, both individually and in the aggregate, are typically immaterial. In addition, in the past, our vessels have been
involved in collisions resulting in loss of life and property as well as weather-related events which damaged our cargo.
The occurrence of any of the aforementioned risks could have a material adverse effect
on our business, financial condition, results of operations or liquidity and we may not be adequately insured against any of these risks.
For more information about our insurance coverage, see the risk factor entitled “ – Our insurance may be insufficient to cover
losses that may occur to our property or result from our operations.” For example, acts of piracy have historically affected oceangoing
vessels trading in several regions around the world. Attacks similar to those in the Red Sea by the Houthi rebels or as a result of an
escalation of war, potential acts of piracy, and acts of terrorism, continue to be a risk to the international container shipping industry
that requires vigilance. Additionally, our vessels and containers may be subject to attempts by smugglers to hide drugs and other contraband
onboard. If our vessels are found with contraband, whether with or without the knowledge of any of our crew, we may face governmental
or other regulatory claims or penalties as well as suffer damage to our reputation, which could have an adverse effect on our business,
results of operations and financial condition.
25
Our insurance may be insufficient to cover
losses that may occur to our property or result from our operations.
The operation of any vessel includes risks such as mechanical failure, collision,
fire, contact with floating objects, property loss, cargo loss or damage and business interruption due to political circumstances in foreign
countries, hostilities and labor strikes. In addition, there is always an inherent possibility of a marine disaster, including oil spills
and other environmental mishaps. There are also liabilities arising from owning and operating vessels in international trade. We procure
insurance for our fleet in relation to risks commonly insured against by operators and vessel owners, which we believe is adequate. Our
current insurance includes (i) hull and machinery insurance covering damage to our and third-party vessels’ hulls and machinery
from, among other things and collisions (ii) war risks insurance covering losses associated with the outbreak or escalation of hostilities
and (iii) protection and indemnity insurance, entered with reputable protection and indemnity, or P&I, clubs covering, among other
things, third-party and crew liabilities such as expenses resulting from the injury or death of crew members, passengers and other third
parties, lost or damaged cargo, third-party claims in excess of a vessel’s insured value arising from collisions with other vessels,
damage to other third-party property including fixed and floating objects, in excess of a vessel’s insured value and pollution arising
from oil or other substances.
While all of our insurers and P&I clubs are highly reputable, we can give no assurance
that we are adequately insured against all risks or that our insurers will pay a particular claim, especially with respect to war risks,
the insurance cost for which has risen sharply recently as a result of the military tension and escalation in the Middle East. Even if
our insurance coverage is adequate to cover our losses, we may not be able to obtain a timely replacement vessel or other equipment in
the event of a loss. In addition, there are restrictions on the use of insurance proceeds we may receive from claims under our insurance
policies. We may also be subject to supplementary calls, or premiums, in amounts based not only on our own claim records but also the
claim records of all other members of the P&I clubs through which we receive indemnity insurance coverage. There is no cap on our
liability exposure for such calls or premiums payable to our P&I clubs, even though unexpected additional premiums are usually at
reasonable levels as they are distributed among a large number of ship owners. Our insurance policies also contain deductibles, limitations
and exclusions which, although we believe are standard in the shipping industry, may nevertheless increase our costs. While we do not
operate any tanker vessels, a catastrophic oil spill or a marine disaster could, under extreme circumstances, exceed our insurance coverage,
which might have a material adverse effect on our business, financial condition and results of operations.
Any uninsured or underinsured loss could harm our business and financial condition.
In addition, the insurance may be voidable by the insurers as a result of certain actions, such as vessels failing to maintain required
certification. Further, we do not carry loss of hire insurance. Loss of hire insurance covers the loss of revenue during extended vessel
off-hire periods, such as those that occur during an unscheduled drydocking due to damage to the vessel from accidents. Any loss of a
vessel or any extended period of vessel off-hire, due to an accident or otherwise, could have an adverse effect on our business, financial
condition and results of operations.
Maritime claimants could arrest our vessels,
which could have a material adverse effect on our business, financial condition and results of operations.
Crew members, suppliers of goods and services to a vessel, shippers or receivers of
cargo, vessel owners and lenders and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or
damages, including, in some jurisdictions, for debts incurred by previous owners. In many jurisdictions, a maritime lienholder may enforce
its lien by vessel arrest proceedings. Unless such claims are settled, vessels may be subject to foreclosure under the relevant jurisdiction’s
maritime court regulations. In some jurisdictions, under the “sister ship” theory of liability, a claimant may arrest both
the vessel that is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or
controlled by the same owner. Claimants could try to assert “sister ship” liability against one vessel in our fleet for claims
relating to another of our vessels. The arrest or attachment of one or more of our vessels could interrupt our business or require us
to pay or deposit large sums to have the arrest lifted, which could have a material adverse effect on our business, financial condition
and results of operations.
26
Governments, including that of Israel, could
requisition our vessels during a period of war or emergency, resulting in loss of earnings.
A government of the jurisdiction where one or more of our vessels are registered,
as well as a government of the jurisdiction where the beneficial owner of the vessel is registered, could requisition for title or seize
our vessels. Requisition for title occurs when a government takes control of a vessel and becomes its owner. A government could also requisition
our vessels for hire. Requisition for hire occurs when a government takes control of a ship and effectively becomes the charterer at dictated
charter rates. Requisitions generally occur during periods of war or emergency, although governments may elect to requisition vessels
in other circumstances. We would expect to be entitled to compensation in the event of a requisition of one or more of our vessels; however,
the amount and timing of payment, if any, would be uncertain and beyond our control. For example, our chartered-in and owned vessels,
including those that do not sail under the Israeli flag, may be subject to control by Israeli authorities in order to protect the security
of, or bring essential supplies and services to, the State of Israel. Government requisition of one or more of our vessels could have
a material adverse effect on our business, financial condition and results of operations.
Risks related to regulation
The shipping industry is subject to extensive
government regulation and standards, international treaties and trade prohibitions and sanctions.
The shipping industry is subject to extensive regulation that changes from time to
time and that applies in the jurisdictions in which shipping companies are incorporated, the jurisdictions in which vessels are registered
(flag states), the jurisdictions governing the ports at which vessels call, as well as regulations by virtue of international treaties
and membership in international associations. As a global container shipping company, we are subject to a wide variety of international,
national and local laws, regulations and agreements. As a result, we are subject to extensive government regulation and standards, customs
inspections and security checks, international treaties and trade prohibitions and sanctions, including laws and regulations in each of
the jurisdictions in which we operate, including those of the State of Israel, the United States, the International Safety Management
Code, or the ISM Code, and the European Union. Such extensive regulation could also become more and more restrictive or less permissive
from time to time, such as, for example, the OSRA enactment and the non-renewal of maritime block exemptions for operational agreements
between carriers in several jurisdictions. Moreover, a few years ago the China Ministry of Transportation approached us as well as several
other carriers with a request for information with respect to their customer charging practices and the reporting of such charges and
variations thereof with the relevant regulator.
In recent years, several governments have adopted and are promoting additional legislation
intended to provide an advantage to local and/or national shipping industry participants over foreign-based carriers. In February 2026
the U.S. Executive Office of President Trump released a “Maritime Action Plan”, which includes, among others, a proposal to
impose a universal fee on foreign-built vessels from any nation entering U.S. ports. In addition, in April 2025 the U.S. Trade Representative,
or USTR, published final actions that apply a fee on Chinese vessels operators and owners, Chinese built vessels and vessel operators
of foreign vehicle carriers calling U.S. ports. In October 2025, days prior to the USTR entering into effect, the China Ministry of Transport,
or MOT, issued a similar regulation in response to the USTR which imposes new port fees on certain U.S. affiliated vessels calling on
China ports. While both USTR and the China MOT announced the suspension of all port fees collection for one year (until November 2026),
if either or both regulations enforcement resume, this could have an adverse effect on our operations and financial conditions. A significant
portion of the vessels we operate were built in China, and although the State of Israel holds the Special State Share in us, for so long
as our ordinary shares are traded on the NYSE with more than 25% U.S shareholders, we may be considered as a U.S. affiliated company under
the suspended Chinese regulation. Therefore, if these regulations resume, we may incur substantial additional operating expenses which
may not be recoverable from our customers. Similar regulatory trends exists in other jurisdictions, such as India, where a new legislative
initiative includes the extension of the applicable competition block exemption for vessel sharing agreements, provided that: (i) at least
5% of the total space of the vessel sharing agreement is carried by Indian flag vessels; and (ii) at least 5% of the total space available
in such vessel sharing agreement is allocated to an Indian non-vessel operating common carrier (NVOCCs) entity. In Bangladesh, legislation
was passed requiring at least 50% of the sea-borne cargoes relating to foreign trade be carried by Bangladesh flag vessels. These
legislative proposals and regulations, including any future similar legislation which may be adopted in other jurisdictions, may place
us and other foreign carriers at a disadvantage in certain countries and adversely affect our business. For additional information, see
below – “We are subject to competition and antitrust regulations in the countries where we operate, have been subject to antitrust
investigations by competition authorities in the past and may be subject to antitrust investigations in the future. Moreover, we rely
on applicable competition exemptions for operational agreement with other carriers, and the revocation of these exemptions could negatively
affect our business and ability to conduct our business.”
27
Any violation or alleged violation of such laws, regulations, treaties and/or prohibitions
could have a material adverse effect on our business, financial condition, results of operations and liquidity and may also result in
the revocation or non-renewal of our “time-limited” licenses. Furthermore, the U.S. Department of the Treasury’s Office
of Foreign Assets Control, or OFAC, administers certain laws and regulations that impose restrictions upon U.S. companies and persons
and, in some contexts, foreign entities and persons, with respect to activities or transactions with certain countries, governments, entities
and individuals that are the subject of such sanctions laws and regulations. Similar sanctions are imposed by the European Union and the
United Nations. Under economic and trading sanction laws, governments may seek to impose modifications to business practices, and modifications
to compliance programs, which may increase compliance costs, and may subject us to fines, penalties and other sanctions. For additional
information, see “Item 4.B – Business Overview – Regulatory Matters.”
We are subject to competition and antitrust
regulations in the countries where we operate, have been subject to antitrust investigations by competition authorities in the past and
may be subject to antitrust investigations in the future. Moreover, we rely on applicable competition exemptions for operational agreement
with other carriers, and the revocation of these exemptions could negatively affect our business and ability to conduct our business.
In recent years, a number of liner shipping companies, including us, have been
the subject of antitrust investigations in the U.S., the EU and other jurisdictions into possible anti-competitive behavior. Although
we have taken measures to fully comply with antitrust regulatory requirements and have adopted a comprehensive antitrust compliance plan,
which includes, among other, mandatory periodic employee trainings, we face investigations from time to time, and, if we are found to
be in violation of the applicable regulation, we could be subject to criminal, civil and monetary sanctions, as well as related legal
proceedings.
We are subject to competition and antitrust regulations in each of the countries where
we operate. In some of the jurisdictions in which we operate, operational partnerships among shipping companies are generally exempt from
the application of antitrust laws, subject to the fulfillment of certain exemption requirements. We are a party to numerous operational
partnerships and view these agreements as competitive advantages in response to the market concentration in the industry as a result of
mergers and global alliances. An amendment to or a revocation of any of the exemptions for operational partnerships that we rely on could
negatively affect our business and results of operations. Specifically, Commission Regulation (EC) No 906/2009, or the Consortia Block
Exemption Regulation (CBER), exempted certain cooperation agreements in the liner shipping sector (such as operational cooperation agreements),
from the prohibition on anti-competitive agreements contained at Article 101 of the Treaty on the Functioning of the European Union (TFEU),
and expired in April 2024. Similarly, the United Kingdom’s Competition and Markets Authority (CMA) did not enact a UK block exemption
that would replace the CBER following Brexit. The non-renewal of the block exemption regulation in the EU and UK may increase our legal
costs, and the legal uncertainty stemming from such inaction may delay the implementation of operational cooperation agreements, thus
potentially limiting our ability to enter into cooperation arrangements with other carriers. In addition, the non-renewal of the existing
CBER raises concerns of a “domino effect” for the non-renewal or the shortening the effective period of similar block exemption
regulations in other jurisdictions, including Israel (similarly to the UK). Any of the above could adversely affect our business, financial
condition and results of operations.
During the last five years, there is an increased scrutiny and enforcement actions
by governments and regulators around the world, including the FMC and the ministry of transportation in China. In the U.S., the Ocean
Shipping Reform Act of 2022 (OSRA) signed into law in June 2022 mandates a series of rulemaking projects by the Federal Maritime Commission
(FMC), including relating to the collection of detention and demurrage from U.S. truckers and consignees on import, which may affect our
ability to effectively collect these fees from our customers, heighten the risk of civil litigation against us and adversely affect our
financial results, and relating to the definition of unreasonable refusal to deal or negotiate with respect to vessel space accommodations,
which may limit our ability to refuse shipments under certain circumstances due to commercial or operational considerations. Further,
in January 2026 the FMC announced the launch of a non-adjudicatory investigation into alleged carrier practices and restrictions relating
to chassis usage, and whether ocean common carriers are relying on service contract terms or other means to mandate that motor carriers
(truckers) and shippers use the ocean common carriers’ designated chassis provider. If we are found to be in violation of the applicable
regulation, we could be subject to various sanctions, including monetary sanctions.
We are also subject from time to time to civil litigation relating, directly or indirectly,
to alleged anti-competitive practices and may be subject to additional investigations by other competition authorities. These types of
claims, actions or investigations could continue to require significant management time and attention and could result in significant
expenses as well as unfavorable outcomes which could have a material adverse effect on our business, reputation, financial condition,
results of operations and liquidity. For further information, see “Item 4.B – Business Overview – Legal Proceedings”
and Note 27 to our audited consolidated financial statements included elsewhere in this Annual Report.
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We could be adversely affected by violations
of the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws outside of the United States.
The U.S. Foreign Corrupt Practices Act, or the FCPA, and similar anti-bribery laws
in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or
other persons around the world for the purpose of obtaining or retaining business. Recent years have seen a substantial increase
in anti-bribery law enforcement activity, with more frequent and aggressive investigations and enforcement proceedings by both the Department
of Justice and the SEC, increased enforcement activity by non-U.S. regulators, and increases in criminal and civil proceedings brought
against companies and individuals. On February 10, 2025, U.S. President Donald Trump issued an executive order and fact sheet suspending
the initiation of new FCPA investigations and enforcement actions for a period of 180 days and directing the U.S. Department of Justice
to review pending investigations. Future enforcement trends or policies are unpredictable. Our anti-bribery and anti-corruption
compliance plan mandates compliance with these anti-bribery laws, establishes anti-bribery and anti-corruption policies and procedures,
imposes mandatory training on our employees and enhances reporting and investigation procedures. We operate in many parts of the world
that are recognized as having governmental and commercial corruption. We cannot assure you that our internal control policies and procedures
will protect us from reckless or criminal acts committed by our employees or third party intermediaries. In the event that we believe
or have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, including the FCPA,
we may be required to investigate or have outside counsel investigate the relevant facts and circumstances, which can be expensive and
require significant time and attention from senior management. Violations of these laws may result in criminal or civil sanctions, inability
to do business with existing or future business partners (either as a result of express prohibitions or to avoid the appearance of impropriety),
injunctions against future conduct, profit disgorgements, disqualifications from directly or indirectly engaging in certain types of businesses,
the loss of business permits or other restrictions which could disrupt our business and have a material adverse effect on our business,
financial condition, results of operations or liquidity.
Increased inspection procedures, tighter import
and export controls and new security regulations could increase costs and disrupt our business.
International container shipments are subject to security and customs inspection and
related procedures in countries of origin, destination, and certain transshipment points. These inspection procedures can result in cargo
seizures, delays in the loading, offloading, transshipment, or delivery of containers, and the levying of customs duties, fines or other
penalties against us as well as damage our reputation. Changes to existing inspection and security procedures, including as a result of
political or public pressure, could impose additional financial and legal obligations on us or our customers and may, in certain cases,
render the shipment of certain types of cargo uneconomical or impractical. For example, in December 2023, a criminal complaint was filed
against us calling for an investigation into an alleged violation of local laws in connection with certain military cargo we carried on
board at the time we arrived to the relevant jurisdiction. We cannot assess the outcome of this proceeding at this time. See Note 27 of
our audited consolidated financial statements included elsewhere in this Annual Report for more information on this and other pending
legal proceedings we are a party to. If, as a result of any government investigations, we are found to be in violation of the applicable
regulation, we could be subject to criminal, civil and monetary sanctions. Any such changes or developments, including in our pending
legal proceedings, may have a material adverse effect on our business, financial condition and results of operations.
The operation of our vessels is also affected by the requirements set forth in the
International Ship and Port Facility Security Code, or the ISPS Code. The ISPS Code requires vessels to develop and maintain a ship security
plan that provides security measures to address potential threats to the security of ships or port facilities. Although each of our vessels
is ISPS Code-certified, any failure to comply with the ISPS Code or maintain such certifications may subject us to increased liability
and may result in denial of access to, or detention in, certain ports. Furthermore, compliance with the ISPS Code requires us to incur
certain costs. Although such costs have not been material to date, if new or more stringent regulations relating to the ISPS Code are
adopted by the International Maritime Organization (the IMO) and the flag states, these requirements could require significant additional
capital expenditures by us or otherwise increase the costs of our operations.
We are subject to environmental regulations
and failure to comply with these regulations could have a material adverse effect on our business. In addition, Environmental, Social
and Governance (ESG) regulation and reporting is expected to intensify in the future, which could increase our operating expenses.
Our operations are subject to international conventions and treaties, national, state
and local laws and national and international regulations in force in the jurisdictions in which our vessels operate or are registered
relating to the protection of the environment. Such requirements are subject to ongoing developments and amendments and relate to, among
other things, the storage, handling, emission, transportation and discharge of hazardous and non-hazardous substances, such as sulfur
oxides, nitrogen oxides and the use of low- sulfur fuel or shore power voltage, and the remediation of contamination and liability for
damages to natural resources. We are subject to the International Convention for the Prevention of Pollution from Ships (or, MARPOL Convention,
including designation of Emission Control Areas thereunder), the International Convention for the Control and Management of Ships Ballast
Water & Sediments, the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous
and Noxious Substances by Sea of 1996, the Oil Pollution Act of 1990, the Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA), the U.S. Clean Water Act (CWA), and National Invasive Species Act (NISA), among others. Compliance with such laws, regulations
and standards, where applicable, may require the installation of costly equipment, make ship modifications or operational changes and
may affect the useful lives or the resale value of our vessels.
29
If we fail to comply with any environmental requirements applicable to us, we could
be exposed to, among other things, significant environmental liability damages, administrative and civil penalties, criminal charges or
sanctions, and could result in the termination or suspension of, and substantial harm to, our operations and reputation. For example,
in September 2022 we were approached by a state regulatory agency indicating to us that we did not meet the local environmental regulation
and provided an initial informal assessment as to our scope of liability, and we ultimately settled this claim in 2025. See Note
27 of our audited consolidated financial statements included elsewhere in this Annual Report. Additionally, environmental laws often impose
strict, joint and several liability for remediation of spills and releases of oil and hazardous substances, which could subject us to
liability without regard to whether we were negligent or at fault. Under local, national and foreign laws, as well as international treaties
and conventions, we could incur material liabilities, including remediation costs and natural resource damages, as well as third-party
damages, personal injury and property damage claims in the event there is a release of petroleum or other hazardous substances from our
vessels, or otherwise, in connection with our operations. We are required to satisfy insurance and financial responsibility requirements
for potential petroleum (including marine fuel) spills and other pollution incidents. Although we have arranged insurance to cover certain
environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will
not have a material adverse effect on our business, results of operations and financial condition. Violations of, or liabilities under,
environmental requirements can result in substantial penalties, fines and other sanctions, including in certain instances, seizure or
detention of our vessels and events of this nature could have a material adverse effect on our business, reputation, financial condition
and results of operations.
Furthermore, we are subject to limits imposed by IMO regulations on the maximum sulfur
content of our fuel, as well as other GHG regulations such as the EU Emission Trade System and FuelEU Regulation. See- “Rising energy
and bunker prices (including LNG) may have an adverse effect on our result of operations” and “Climate change and GHG restrictions
may adversely affect our operating results.”
We may also incur additional compliance costs relating to existing or future ESG requirements,
which have recently intensified and are expected to intensify in the future, and which could have a material adverse effect on our business,
results of operations and financial conditions. Environmental or other incidents may result in additional regulatory initiatives,
statutes or changes to existing laws that could affect our operations, require us to incur additional compliance expenses, lead to decreased
availability of or more costly insurance coverage, and result in our denial of access to, or detention in, certain jurisdictional waters
or ports. We may also become subject to legal mandates to disclose climate-related risks, GHG emissions data or other ESG-related information.
For further information on the environmental regulations we are subject to and ESG (sustainability), see “Item 4.B –
Business Overview – Regulatory matters – Environmental and other regulations in the shipping industry.”
Regulations relating to ballast water discharge
may adversely affect our results of operation and financial condition.
The IMO has imposed updated guidelines for ballast water management systems specifying
the maximum amount of viable organisms allowed to be discharged from a vessel’s ballast water. Depending on the date of the international
oil pollution prevention, or IOPP, renewal survey, existing vessels constructed before September 8, 2017, must comply with the updated
D-2 standard on or after September 8, 2019, but no later than September 9, 2024. For most vessels, compliance with the D-2 standard
will involve installing on-board systems to treat ballast water and eliminate unwanted organisms (ballast water management systems). All
vessels constructed on or after September 8, 2017, are required to comply with the D-2 standards. To date, all of our owned vessels
are installed with on-board ballast systems, however any additional requirements may subject us to additional costs of compliance and
adversely affect our results of operation and financial condition. New guidance on ballast water, which entered into effect in February
2025 and October 2025. address ballast water record keeping, approval of electronic record book systems and vessel-specific declaration
requirements applicable to electronic ballast water record keeping.
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We are also subject to U.S. regulations with respect to ballast water discharge. Although
the 2013 Vessel General Permit (VGP) program and The National Invasive Species Act (NISA) are currently in effect to regulate ballast
discharge, exchange and installation, the Vessel Incidental Discharge Act (VIDA), which was signed into law on December 4, 2018,
requires that the EPA develop national standards of performance for approximately 30 discharges, similar to those found in the VGP. In
October 2024, the EPA published the final standards of performance under VIDA. Pursuant to VIDA, these standards will become effective
upon the U.S. Coast Guard’s issuance of corresponding implementation, compliance and enforcement regulations regarding ballast water
within two years of the EPA’s publication of proposed rulemaking. Accordingly, all provisions of the 2013 VGP will remain in force
and effect until the USCG regulations under VIDA are finalized. Furthermore, we are also subject, and may be subject in the future, to
local or state ballast regulation. For example, on January 1, 2022, new ballast water management requirements entered into effect in California.
State enacted requirements may include more stringent standards than the proposed requirements and standards set forth by the EPA and
U.S. Coast Guard. New federal and state regulations could require the installation, or further improvement of already installed ballast
management systems, or place new requirements and standards which may cause us to incur substantial costs.
Climate change and GHG restrictions
may adversely affect our operating results.
Many governmental bodies have adopted, or are considering the adoption of, international,
treaties, national, state and local laws, regulations and frameworks to reduce GHG emissions due to the concern about climate change.
These measures in various jurisdictions include the adoption of cap and trade regimes, carbon taxes, increased efficiency standards, and
incentives or mandates for renewable energy. In November 2016, the Paris Agreement, which resulted in commitments by 197 countries
to reduce their GHG emissions with firm target reduction goals, came into force and could result in additional regulation on shipping.
The IMO has been developing a comprehensive strategy on reduction of GHG emissions from ships. In addition, several non-governmental organizations
and institutional investors have undertaken campaigns with respect to climate change, with goals to minimize or eliminate GHG emissions
through a transition to a low- or zero-net carbon economy.
For example, on November 1, 2022, new amendments to the MARPOL Annex VI entered into
effect and introduced new energy efficiency and CO2 emissions requirements relating to Existing Ship Energy Index (EEXI), which is a vessel’s
energy efficiency rating compared to a baseline, and Operational Carbon Intensity Indicator (CII), which is a rating based on the vessel’s
GHG emissions relative to distance traveled and cargo carrying capacity, for both new and existing vessels. Compliance with the new regulation,
which became mandatory as of January 1, 2023, involves additional costs and the implementation of optimization strategies such as slow
steaming, which may increase our vessels’ voyage transit times. Further, on January 1, 2024, the European Union’s Emissions
Trading System, or ETS, entered into effect for the maritime industry and sets a limit on the total amount of GHGs that we as a shipping
company are permitted to emit en route to or from European Union members’ ports. Such cap is expressed in emission allowances, where
one allowance gives the right to emit one ton of carbon dioxide equivalent. Each year, we will be required to surrender enough allowances
to fully account for our emissions, otherwise we will be subject to heavy fines. The ETS Regulations require us to purchase and surrender
allowances equal to a percentage of our emissions that is 70% of reported emissions in 2025 and will increase to 100% of reported emissions
in 2026. We have implemented a New Emission Factor, or NEF, surcharge, intended to shift the additional costs associated with compliance
with the ETS Regulations to our customers.
Additionally, the new FuelEU Maritime Regulation (Regulation (EU) 2023/1805), which
entered into effect in January 2025, sets requirements for the annual average GHG intensity of energy used by vessels trading within the
European Union or European Economic Area. This regulation requires carriers to perform a gradual reduction in the GHG intensity of energy
used by vessels at European ports from a baseline GHG intensity level derived from 2020 data, starting with a 2% reduction from the baseline
by 2025 and reaching 80% by 2050. As a result, vessels will be required to shift to lower emission fuels instead of traditional marine
fuels. We intend to recover the additional costs associated with this regulation by increasing the relevant bunker surcharges applied
to our customers. However, there is no assurance that any of the surcharges described or the increase of applicable surcharges will enable
us to mitigate the possible increased costs, in full or at all. The IMO 2020, ETS, the FuelEU Regulations or any additional air emissions
or bunker regulation with which we must comply may cause us to incur substantial additional operating costs. See – “Regulatory
Matters – European Union requirements.”
31
Compliance with laws, regulations and obligations relating to climate change, including
as a result of such international negotiations, as well as the efforts by non-governmental organizations and investors, could increase
our costs related to operating and maintaining our vessels and require us to install new emission controls, acquire allowances or pay
taxes related to our GHG emissions, or administer and manage a GHG emissions program. Revenue generation and strategic growth opportunities
may also be adversely affected.
Compliance with safety and other requirements
imposed by classification societies may be very costly and may adversely affect our business.
The hull and machinery of every commercial vessel must be classed by a classification
society. The classification society certifies that the vessel has been built, maintained and repaired, when necessary, in accordance with
the applicable rules and regulations of the classification society. Moreover, every vessel must comply with all applicable international
conventions and the regulations of the vessel’s flag state as verified by a classification society as well as the regulations of
the beneficial owner’s country of registration. Finally, each vessel must successfully undergo periodic surveys, including annual,
intermediate and special surveys, which may result in recommendations or requirements to undertake certain repairs or upgrades. Currently,
all our vessels have the required certifications. However, maintaining class certification could require us to incur significant costs.
If any of our owned and certain of our chartered-in vessels does not maintain its class certification, it might lose its insurance coverage
and be unable to trade, and we will be in breach of relevant covenants under our financing arrangements, in relation to both failing to
maintain the class certification as well as having effective insurance. Failure to maintain the class certification of one or more of
our vessels could have, under extreme circumstances, a material adverse effect on our financial condition, results of operations and liquidity.
Changes in tax laws, tax treaties as well as
judgments and estimates used in the determination of tax-related asset (liability) and income (expense) amounts, could materially adversely
affect our business, financial condition and results of operations.
We operate in various jurisdictions and may be subject to the tax regimes and related
obligations in the jurisdictions in which we operate or do business. Changes in tax laws, bilateral double tax treaties, regulations and
interpretations could adversely affect our financial results. The tax rules of the various jurisdictions in which we operate or conduct
business often are complex, involve bilateral double tax treaties and are subject to varying interpretations. Specifically, Pillar Two
rules, which were introduced in December 2022 by the OECD and are substantially in effect since January 1, 2024 in some of the jurisdictions
in which we operate, are intended to ensure that large multinational enterprises (MNEs) pay a minimum level of tax on the income arising
in each such jurisdiction. While Pillar Two model rules are not intended to be applied to international shipping income, they may apply
to other sources of our income. While we do not expect any potential exposure to Pillar Two taxes, we may be subject to additional and/or
higher tax payments as a result of this regulation, whether due to any amendment or due to the absence of applicable safe harbor exemptions
to us and/or our subsidiaries.
Tax authorities may challenge tax positions that we take or historically have taken,
may assess taxes where we have not made tax filings, or may audit the tax filings we have made and assess additional taxes. Such assessments,
either individually or in the aggregate, could be substantial and could involve the imposition of penalties and interest. For such assessments,
from time to time, we use external advisors. In addition, governments could impose new taxes on us or increase the rates at which we are
taxed in the future. The payment of substantial additional taxes, penalties or interest resulting from tax assessments, or the imposition
of any new taxes, could materially and adversely impact our results, financial condition and liquidity. Additionally, our provision for
income taxes and reporting of tax-related assets and liabilities require significant judgments and the use of estimates. Amounts of tax-related
assets and liabilities involve judgments and estimates of the timing and probability of recognition of income, deductions and tax credits.
Actual income taxes could vary significantly from estimated amounts due to the future impacts of, among other things, changes in tax laws,
regulations and interpretations, our financial condition and results of operations, as well as the resolution of any audit issues raised
by taxing authorities.
Risks related to our financial position and results
If we are unable to generate sufficient cash
flows from our operations, our liquidity will suffer and we may be unable to satisfy our obligations and operational needs.
Our ability to generate cash flow from operations to cover our operational costs and
to make payments in respect of our obligations, financial liabilities (mainly lease liabilities) and operational needs will depend on
our future performance, which will be affected by a range of economic, competitive and business factors. We cannot control many of these
factors, including general economic conditions and the health of the shipping industry. If we are unable to generate sufficient cash flow
from operations to satisfy our obligations, liabilities and operational needs, we may need to borrow funds or undertake alternative financing
plans, or to reduce or delay capital investments and other costs. It may be difficult for us to incur additional debt on commercially
reasonable terms due to, among other things, our financial position and results of operations and market conditions. Specifically, we
have incurred substantial debt as part of our strategy to renew and improve our fleet by long-term chartering newbuild vessels, including
TEU LNG fueled vessels, and we have entered into chartering agreements for additional vessels, ten of which are LNG fuelled, and which
are expected to be delivered in 2027-2028, and we may may incur substantial debt in the future if we purchase or long-term charter additional
vessels. Although as of December 31, 2025, our cash position was strong with liquidity of $2.8 billion, our potential inability to generate
sufficient cash flows from operations or obtain additional funds or alternative financing on acceptable terms could have a material adverse
effect on our business.
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Volatile market conditions could negatively affect our business,
financial position, or results of operations and could thereby result in impairment charges.
As of the end of each of our reporting periods, we examine whether there have been
any events or changes in circumstances, such as a deterioration of general economic or market conditions, which may indicate an impairment.
When there are indications of an impairment, an examination is made as to whether the carrying amount of the operating assets or cash
generating units, or CGUs, exceeds their respective recoverable amount and, if necessary, an impairment loss is recognized in our financial
statements.
We recognized a partial impairment reversal of approximately of $137 million for the
year ended December 31, 2025. We did not recognize any impairment loss (or reversal) for the year ended December 31, 2024. We recognized
an impairment loss of approximately $2.1 billion in the third quarter of 2023. With respect to the impairment analysis carried out during
the years ended December 31, 2025, December 31, 2024 and December 31, 2023, see Note 7 to our audited consolidated financial statements
included elsewhere in this Annual Report. We cannot assure that we will not recognize additional impairment losses in future years. If
an impairment loss is recognized, our results of operations will be negatively affected. Should freight rates decline significantly or
we or the shipping industry experience adverse conditions, this may have a material adverse effect on our business, results of operations
and financial condition, which may result in us recording an impairment charge.
Foreign exchange rate fluctuations and controls
could have a material adverse effect on our earnings and the strength of our balance sheet.
Since we generate revenues in a number of geographic regions across the globe, we
are exposed to operations and transactions in other currencies. A material portion of our expenses are denominated in local currencies
other than the U.S. dollar. Most of our revenues and a significant portion of our expenses are denominated in the U.S. dollar, creating
a partial natural hedge. To the extent other currencies increase in value relative to the U.S. dollar, our margins may be adversely affected.
Foreign exchange rates may also impact trade between countries as fluctuations in currencies may impact the value of goods as between
two trading countries. Where possible, we endeavor to match our foreign currency revenues and costs to achieve a natural hedge against
foreign exchange and transaction risks, although there can be no assurance that these measures will be effective in the management of
these risks. Consequently, short-term or long-term exchange rate movements or controls may have a material adverse effect on our business,
financial condition, results of operations and liquidity. In addition, foreign exchange controls in countries in which we operate may
limit our ability to repatriate funds from foreign affiliates or otherwise convert local currencies into U.S. dollars.
Our operating results may be subject to seasonal fluctuations.
The markets in which we operate have historically exhibited seasonal variations in
demand and, as a result, freight rates have also historically exhibited seasonal variations. This seasonality can have an adverse effect
on our business and results of operations. As global trends that affect the shipping industry have changed rapidly in recent years, it
remains difficult to predict these trends and the extent to which seasonality will be a factor affecting our results of operations in
the future. See “Item 5 - Operating and Financial Review and Prospects — Factors affecting comparability of financial position
and results of operations – Seasonality.”
Risks related to our operations in Israel
We are incorporated and based in Israel and,
therefore, our results may be adversely affected by political, economic and military instability in Israel and the Middle East. Specifically,
the current military tensions between the U.S. and Iran, Israel and Iran and Iranian-backed proxies as well as the military tensions between
Israel and Hamas after the ceasefire in October 2025 may adversely affect our business.
We are incorporated and our headquarters are located in Israel and the majority of
our key employees, officers and directors are residents of Israel. Additionally, the terms of the Special State Share require us to maintain
our headquarters and to be incorporated in Israel, and to have our chairman, chief executive officer and a majority of our board members
be Israeli. As an Israeli company, we have relatively high exposure, compared to many of our competitors, to war, acts of terror, hostile
activities including cyber-attacks, security limitations imposed upon Israeli organizations overseas, possible isolation by various organizations
and institutions for political reasons and other limitations (such as restrictions against entering certain ports). Political, economic
and military conditions in Israel may directly affect our business, our service routes and port of calls and existing relationships with
certain foreign corporations, as well as affect the willingness of potential partners to enter into business arrangements with us.
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Our commercial insurance does not cover losses that may occur as a result of an event
associated with the security situation in the Middle East, and we may not be able to obtain adequate insurance if events escalate further.
The Israeli government currently provides compensation only for physical property damage caused by terrorist attacks or acts of war, based
on the difference between the asset value before the attack and immediately after the attack or on any cost of repairing the damage, whichever
is lower, but we cannot assure that this coverage will be maintained or that it will sufficiently cover any of our potential damages.
Any losses or damages incurred by us could have a material adverse effect on our business. Further, due to the Israel-Hamas war, a special
war risk insurance premium was levied on our owned and chartered vessels calling Israel’s territorial water and ports. We have applied
a war surcharge on our customers in an attempt to offset the cost associated with the payment of this war risk insurance premium; however,
there is no assurance that this surcharge will enable us to mitigate the possible increased costs in full or at all.
Since the establishment of the State of Israel in 1948, a number of armed conflicts
have taken place between Israel, its neighboring countries and terror organizations which are today considered to be mostly backed by
Iran. Terrorist activity and acts of violence were perpetrated against Israel since its establishment, including from its northern border,
Gaza, West Bank and East Jerusalem. On October 7, 2023, Hamas terrorists launched a surprise attack and invaded southern Israel from Gaza
under the cover of a barrage of missiles launched into southern Israel, targeting the Israeli civilian population and local military forces,
and taking hostages into the Gaza strip. In response to this assault, Israel declared war on Hamas and the Israeli Defense Force invaded
the Gaza strip. In October 2025 Israel and Hamas agreed to a U.S. brokered ceasefire and a hostage release exchange, to form the first
phase of a broader peace initiative advanced by the U.S. President Donald Trump.
During the two-year Israel-Hamas war, other terror organizations such as Hezbollah in Lebanon and the Houthis
in Yemen, both backed by Iran, have launched missile and drone attacks against Israel as part of what they have referred to as “axis
of resistance” and in support of Gaza. Further, in Yemen, the Houthis have attacked vessels in the Red Sea suspected by them to
be either linked to Israel or to call Israeli ports. The situation remains volatile and unpredictable. Israel has also carried out four
rounds of air strikes against the Houthis in retaliation for the drones and missiles attacks. In September 2024 Israel retaliated against
Hezbollah by targeting and killing many members of the Hezbollah’s senior leadership and launched a ground invasion to south of
Lebanon to dismantle terror tunnels and military equipment used by Hezbollah to target Israeli towns on its northern border. Though Israel
and Hezbollah declared a ceasefire in November 2024, military tensions erupted again in March 2026.
Iran is cultivating a strategy dedicated to annihilating the State of Israel through proxy militia groups
across the Middle East and is believed to have strong influence over the terror organizations known as Hamas in Gaza, Hezbollah in Lebanon,
Houthis in Yemen and pro-Iranian militia groups in Iraq. Furthermore, Iran is believed to be in advanced stages of obtaining nuclear weapon
capabilities, which if completed, will pose a direct threat against the State of Israel, Europe, and the U.S. Iran attacked Israel twice,
in April and October 2024, by launching a barrage of hundreds of missiles and drones towards Israel’s territory each time. The attacks
were mostly intercepted, and in October 2024 Israel retaliated by launching air strikes against various military and strategic sites in
Iran. In June 2025, Israel launched a military campaign “Rising Lion”, targeting Iran’s rapidly advancing nuclear weapons
program, ballistic missile program and related military infrastructure assessed to be posing an imminent and existential threat. The campaign
ended with U.S. military operation “Midnight Hammer” which included the bombing of Iran’s primary nuclear facility.
Tensions between the U.S., Israel and Iran continued, and on February 28, 2026, the U.S. and Israel launched another campaign of attacks.
The full outcome of this new military campaign, which included the killing of the second Supreme Leader of Iran, Ayatollah Ali Khamanei,
is not yet fully known, and could have an adverse impacts on our ongoing operations in the region, as well as our results of operations.
Political uprisings, social unrest and violence in the Middle East and North Africa,
including Egypt, have affected and continue to affect the political stability of those countries and the Middle East as a whole. In December
2024, groups of rebel militia succeeded in toppling down Bashar al-Assad’s regime in Syria, which was backed by Iran. The rebels
are led by Hay’at Tahrir al-Sham, a radical Islamist group initially aligned with the terrorist groups Al Qaida and the Islamic
State (ISIS), which poses a threat against Israel and Israel’s northern-east border. Moreover, Turkey, who declared a boycott on
trade with Israel following the outbreak of the war in Gaza, is considered to have considerable influence in Syria after the change of
regime, which may increase the risk of future confrontation with Israel.
This instability, especially the recent conflicts, has raised concerns regarding security
in the region and the potential for further escalated armed conflicts. In addition, during 2024, multiple rating agencies downgraded Israel’s
credit rating but since then have elevated Israel’s outlook from negative to stable, while risks of increased interest rates, recession,
currency fluctuations, inflation, securities market volatility and uncertainty as to the scope of future investments in Israel remain.
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The escalation of the war, the actual or perceived breach of the recently announced
ceasefires between Israel and Hamas or Hezbollah, any new armed conflicts or hostilities in Israel or neighboring countries or a direct
military war between Israel and Iran could increase the disruptions in our operations, including significant employee absences, failure
of our information technology systems and cyber-attacks, which may lead to the shutdown of our headquarters in Israel for an unknown period
of time. Although we maintain an emergency plan, such events can have material effects on our operational activities. Any future deterioration
in the security or geopolitical conditions in Israel or the Middle East could adversely impact our business relationships and thereby
have a material adverse effect on our business, financial condition, results of operations or liquidity. If our facilities, including
our headquarters, become temporarily or permanently disabled by an act of terrorism or war, it may be necessary for us to develop alternative
infrastructure and we may not be able to avoid service interruptions. Additionally, our owned and chartered-in vessels, including those
vessels that do not sail under the Israeli flag, may be subject to control by the authorities of the State of Israel in order to protect
the security of, or bring essential supplies and services to, the State of Israel. Israeli legislation also allows the State of Israel
to use our vessels in times of emergency. Any of the aforementioned factors may negatively affect us and our results of operations.
Moreover, following the terror attack by Hamas on October 7, 2023, protests in support
of Palestinians and Hamas and against Israel have erupted in the Middle East and western counties, including the U.S. Israel has since
been target of sanctions and other legal actions, and arrest warrants have been brought against its leaders and its citizens before the
International Criminal Court (ICC) in the Hague. Anti-Israel demonstrations and attacks against Israelis and Jewish communities have increased
dramatically across the globe. The increased negative public opinion against Israel across the world may cause countries, corporations
and organizations to limit their business activities with Israeli-linked businesses or deter them from expanding existing engagements.
Our status as an Israeli company may limit our ability to cross the Suez Canal given the threat of Houthi attacks, call certain ports
and enter into alliances or operational partnerships with certain shipping companies, which has historically adversely affected our operations
and our ability to compete effectively within certain trades.
The war in Israel and the Middle East follows a period of internal civil controversy
and protest in Israel over a judicial reform proposal introduced by the Israeli government in January 2023. The judicial reform has sparked
a significant backlash both inside and outside of Israel, led to civil protest and raised economic concerns, and was challenged by an
appeal made to the Israeli supreme court. In January 2024, the Israeli Supreme Court ruled that the portion of the judicial reform previously
legislated by the Israeli parliament, the Knesset, in an attempt to limit judicial review of government actions, is stricken down as unconstitutional.
Tensions between the judiciary, legislative and executive branches ensue, and new attempts to relaunch the judicial reform by government
officials or parliament members may reignite the internal civil protest and escalate economic concerns.
Further, our operations could be disrupted by the obligations of personnel to perform
military service. As of December 31, 2025, we had approximately 820 employees based in Israel, certain of whom are currently called upon
for military service duty due to the war for an unlimited period, and more may be called in the future if the war continues or in other
emergency circumstances. Further, some of our employees are called upon to perform several weeks of annual military reserve duty until
they reach the age qualifying them for an exemption (generally 40 for men who are not officers or do not have specified military professions,
although recently the Israeli government published a possible plan to extend military reserve service duty to the age of 46). Our operations
could be disrupted by the absence of a significant number of employees related to military service, which could materially adversely affect
our business and operations.
Our risks associated with our Israeli affiliation may enhance and further increase
other risk factors detailed in this Annual Report.
Provisions of Israeli law and our articles
of association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, even when the terms of such a
transaction are favorable to us and our shareholders.
Israeli corporate law regulates mergers, requires tender offers for acquisitions of
shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders
and regulates other matters that may be relevant to such types of transactions. For example, a tender offer for all of a company’s
issued and outstanding shares can only be completed if shares constituting less than 5% of the issued share capital are not tendered.
Completion of a full tender offer also requires acceptance by a majority of the offerees that do not have a personal interest in the tender
offer, unless less than 2% of the company’s outstanding shares are not tendered. Furthermore, the shareholders, including those
who indicated their acceptance of the tender offer (unless the acquirer stipulated in its tender offer that a shareholder that accepts
the offer may not seek appraisal rights), may, at any time within six months following the completion of the full tender offer, petition
an Israeli court to alter the consideration for the shares. In addition, special tender offer requirements may also apply upon a purchaser
becoming a holder of 25% or more of the voting rights in a company (if there is no other shareholder of the company holding 25% or more
of the voting rights in the company) or upon a purchaser becoming a holder of more than 45% of the voting rights in the company (if there
is no other shareholder of the company who holds more than 45% of the voting rights in the company). These provisions of Israeli law could
have the effect of delaying or preventing a change in control in us or obstructing or impeding a third party from acquiring us or some
of our shareholders from electing individuals to our board of directors, even if doing so would be considered beneficial by some of our
shareholders, and may limit the price that investors are willing to pay for our ordinary shares. Notwithstanding the foregoing, we have
recently entered into a merger agreement with Hapag-Lloyd AG for the purchase of all our ordinary shares against cash. The closing of
this Merger Agreement is subject to various conditions, including the required approvals under Israeli law and the Special State Share.
For further information, see Item 10.C “Material Contracts - Entry Into Agreement and Plan of Merger with Hapag-Lloyd AG”.
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Furthermore, Israeli tax considerations may make potential transactions unappealing
to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli
tax. For example, Israeli tax law does not generally recognize tax-free share exchanges to the same extent as U.S. tax law. With respect
to mergers involving an exchange of shares, Israeli tax law may allow for tax deferral under certain circumstances but makes the deferral
contingent on the fulfillment of a number of conditions, including, in some cases, a holding period of two years from the date of the
transaction during which sales and dispositions of shares of the participating companies are subject to certain restrictions. Moreover,
with respect to certain share swap transactions in which the sellers receive shares in the acquiring entity that are publicly traded on
a stock exchange, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of such
shares has occurred. In order to benefit from the tax deferral, a pre-ruling from the Israel Tax Authority might be required.
It may be difficult to enforce a judgment of
a U.S. court against us, our officers and directors or the Israeli experts named in this Annual Report in Israel or the United States,
to assert U.S. securities laws claims in Israel or to serve process on our officers and directors and these experts.
We are incorporated in Israel. The majority of our directors and executive officers,
and the Israeli experts listed in this Annual Report reside outside of the United States, and most of our assets and most of the assets
of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including
a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and
may not be enforced by an Israeli court. It may also be difficult to effect service of process on these persons in the United States or
to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged
violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition,
even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S.
law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming
and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that
addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may
not be able to collect any damages awarded by either a U.S. or foreign court.
Our articles of association provide a choice
of forum provision that may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable.
Our articles of association provide that unless we consent in writing to the selection
of an alternative forum, and other than with respect to plaintiffs or a class of plaintiffs which may be entitled to assert in the courts
of the State of Israel, with respect to any causes of action arising under the Securities Act or the Exchange Act, the federal district
courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising
under the Securities Act or the Exchange Act. Our articles of association further provide that unless we consent in writing to the selection
of an alternative forum, the Haifa District Court will be the exclusive forum for the following: (i) any derivative action or proceeding
brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other
employees, to us or to our shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Israeli Companies
Law 5759-1999 (the “Companies Law”) or the Israeli Securities Law of 1968.
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This choice of forum provision may limit a shareholder’s ability to bring a
claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage
such lawsuits. While the validity of choice of forum provisions has been upheld under the law of certain jurisdictions, uncertainty remains
as to whether our choice of forum provision will be recognized by all jurisdictions, including by courts in Israel. If a court were to
find either choice of forum provision contained in our articles of association to be inapplicable or unenforceable in an action, we may
incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our results of operations
and financial condition.
Your rights and responsibilities as a shareholder
are governed by Israeli law, which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.
We are incorporated in Israel. The rights and responsibilities of the holders of our
ordinary shares are governed by our articles of association and by the Israeli law. These rights and responsibilities differ in some material
respects from the rights and responsibilities of shareholders in U.S.-based corporations. In particular, a shareholder of an Israeli company
has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company
and other shareholders, and to refrain from abusing its power in the company, including, among other things, in voting at a general meeting
of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized
share capital, mergers and acquisitions and related party transactions requiring shareholder approval. In addition, a controlling shareholder,
a shareholder who is aware that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment
of a director or executive officer in the company has a duty of fairness toward the company. There is limited case law available to assist
us in understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional
obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.
Our business could be negatively affected as
a result of actions of activist shareholders and/or class action filings, which could impact the trading value of our securities.
In recent years, certain Israeli issuers listed on United States exchanges have been
faced with governance-related demands from activist shareholders, unsolicited tender offers and proxy contests. We faced such demands
in our last annual general meeting of shareholders held on January 2, 2026, at which certain activist shareholders demanded the appointment
of three directors proposed by them. This led to a proxy contest between such shareholders and our Board of Directors that included the
publication of position statements and delayed our annual general meeting. This contest resulted in a settlement pursuant to which two
of the proposed director nominees were recommended for election by our Board and were elected as directors of the Company, and the third
director nominee proposed by our activist shareholders was appointed as an observer to our Board. See also Item 10.C "Material Contracts
– Letter of Agreements by a shareholder activist group". Responding to these types of actions by activist shareholders was and could
be time-consuming, disrupt our operations, divert the attention of our Board of Directors, management and employees and interfere
with our ability to execute our strategic plan. In recent years, we have also seen a significant rise in the filing of class actions in
Israel against public companies, as well as derivative actions against companies, their executives and board members. While the vast majority
of such claims are dismissed, companies are forced to increasingly invest resources, including monetary expenses and investment of management
attention due to these claims. This could adversely affect the willingness of our executives and board members to make decisions which
could have benefitted our business operations. Such legal actions could also be taken with respect to the validity or reasonableness of
the decisions of our Board of Directors. In addition, the rise in the number and magnitude of litigation could result in a deterioration
of the level of coverage of our D&O liability insurance.
Any perceived uncertainties as to our future direction and control, our ability to
execute on our strategy, or changes to the composition of our Board of Directors or senior management team that may arise from future
proposals from shareholders could lead to instability which may be exploited by our competitors, result in the loss of potential business
opportunities, and make it more difficult to pursue our strategic initiatives or attract and retain qualified personnel and business partners,
any of which could have an adverse effect, which may be material, on our business and operating results. In addition, actions such as
those described above could cause significant fluctuations in the trading prices of our ordinary shares based on temporary or speculative
market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
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General risk factors
We face cyber-security risks.
Our business operations rely upon secure information technology systems for data processing,
storage and reporting. As a result, we maintain information security policies and procedures for managing our information technology systems.
Despite security and controls design, implementation and updates, our information technology systems may be subject to cyber-attacks,
including, network, system, application and data breaches. A number of companies around the world, including in our industry, have been
the subject of cyber-security attacks in recent years. For example, one of our peers experienced a major cyber-attack on its IT systems
in 2017, which impacted such company’s operations in its transport and logistics businesses and resulted in significant financial
loss. As an Israeli company, we are a potential target for a cyber-attack, as cyber-attacks against Israeli entities have increased following
the outbreak of war between Israel and Hamas. Other Israeli companies are facing cyber-attack campaigns, and it is believed the attackers
may be from hostile countries. Cyber-attacks are becoming increasingly common and more sophisticated, and may be perpetrated by computer
hackers, cyber-terrorists or others engaged in corporate espionage.
Cyber-security attacks could include malicious software (malware), attempts to gain
unauthorized access to data, social media hacks and leaks, ransomware attacks and other electronic security breaches of our information
technology systems as well as the information technology systems of our customers and other service providers that could lead to disruptions
in critical systems, unauthorized release, misappropriation, corruption or loss of data or confidential information, and breach of protected
data belonging to third parties. In addition, following the COVID-19 pandemic, we have reduced our staffing in our offices and increased
our reliance on remote access of our employees. We have taken measures to enable us to face cyber-security threats, including backup and
recovery and backup measures, as well as cyber security awareness trainings and annual company-wide cyber preparedness drills. However,
there is no assurance that these measures will be successful in coping with cyber-security threats, as these develop rapidly, and we may
be affected by and become unable to respond to such developments. A cyber-security breach, whether as a result of malicious, political,
competitive or other motives, may result in operational disruptions, information misappropriation or breach of privacy laws, including
the European Union’s General Data Protection Regulation and other similar regulations, which could result in reputational damage
and have a material adverse effect on our business, financial condition and results of operation.
We face risks relating to our information technology
and communication system.
Our information technology and communication system supports all of our businesses
processes throughout the supply chain, including our customer service and marketing teams, business intelligence analysts, logistics team
and financial reporting functions. Our two main data centers are located in Europe. Each data center can back up the other one.
Additionally, our information systems and infrastructure could be physically damaged
by events such as fires, terrorist attacks and unauthorized access to our servers and infrastructure, as well as the unauthorized entrance
into our information systems. Furthermore, we communicate with our customers through an ecommerce platform. Our ecommerce platform was
developed and is run by third-party service providers over which we have no management control. A potential failure of our computer systems
or a failure of our third-party ecommerce platform providers to satisfy their contractual service level commitments to us may have a material
adverse effect on our business, financial condition and results of operation. Our efforts to modernize and digitize our operations and
communications with our customers further increase our dependency on information technology systems, which exacerbates the risks we could
face if these systems malfunction.
We are subject to data privacy laws, including
the European Union’s General Data Protection Regulation, and any failure by us to comply could result in proceedings or actions
against us and subject us to significant fines, penalties, judgments and negative publicity.
We are subject to numerous data privacy laws, including Israeli privacy laws and the
European Union’s General Data Protection Regulation (2016/679), or the GDPR, which relates to the collection, use, retention, security,
processing and transfer of personally identifiable information about our customers and employees in the countries where we operate. We
have also been certified as compliant with ISO27001 in Israel (information security management standard) and ISO27701(extension to the
information security management standard).
The EU data protection regime expands the scope of the EU data protection law to all
companies processing data of EEA individuals, imposes a stringent data protection compliance regime, including administrative fines of
up to the greater of 4% of worldwide turnover or €20 million (as well as the right to compensation for financial or non-financial
damages claimed by any individuals), and includes new data subject rights such as the “portability” of personal data. Although
we are generally a business that serves other businesses (B2B), we still process and obtain certain personal information relating to individuals,
and any failure by us to comply with the GDPR or other data privacy laws where applicable could result in proceedings or actions against
us, which could subject us to significant fines, penalties, judgments and negative publicity.
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In addition, the new amendment to the Israeli Privacy Protection Law of 1981, entered
into effect in August 2025, expands the legal obligations of controllers and processors of personal data, and enables the Israeli Privacy
Protection Authority to enforce such obligations and to impose administrative sanctions, including monetary sanctions and, in certain
circumstances, initiate criminal prosecution. The amendment further modifies and expands certain legal requirements for the protection
of personal information of data subjects, and, among other things, mandates certain organizations to appoint a designated data protection
officer, to oversee privacy compliance. If we are found to be in violation with this new regulation once in effect, we could be subject
to enforcement actions, including negative publicity, which could adversely affect our business, financial condition and results of operations.
Our use of artificial intelligence technology,
internally and in our offerings, may not be successful and may result in operational challenges, legal liability, reputational concerns
and privacy and competitive risks.
We currently use and intend to leverage third parties’ artificial intelligence,
or AI, applications in several of our internal processes, and the services we provide. Also, in 2024 we launched an inhouse AI development
center aimed to develop, implement and improve new and automated working processes for the benefit of our customers. As this technology
is becoming more prevalent, we expect to expand our use of AI in various areas of our business. Our use of AI may result in operational
challenges, legal liability, reputational concerns, and privacy and competitive risks, which could result in adverse effects on our financial
condition, results of operations, or reputation. For example, the models underlying our AI-powered solutions may be incorrectly or inadequately
designed or implemented. They may also be trained on, or otherwise use, biased, incomplete, inaccurate, misleading, or poor-quality data
or algorithms, any of which may not be easily detectable. Further, the use of generative AI processes at scale is relatively new and may
lead to challenges, concerns and risks that are significant or that we may not be able to predict, especially if our use of such technologies
in the development or delivery of our products or services becomes more important to our operations over time. Accordingly, our use of
AI-powered solutions may inadvertently reduce our effectiveness and efficiency or generate unintentional or unexpected outputs (including
any AI-generated content, analyses, or recommendations) that are, or are perceived to be, biased, incomplete, inaccurate, misleading,
poor-quality, unethical, or otherwise deficient or flawed, do not match our business goals, standards, or values, do not comply with our
policies or procedures, harm our brand and reputation, negatively impact consumers or otherwise interfere with the performance of our
business. Further, our competitors or other third parties may incorporate AI into their business or operations more quickly or more successfully
than us, which could impair our ability to compete effectively.
We may not have adequate rights to use the data on which our AI-powered solutions
rely. To the extent that we do not have sufficient rights to use the data used in, or produced by, the AI-powered solutions employed in
our business and operations, we may be subject to litigation by the owners of the content or other materials that comprise such data.
Further, any content or other output created by us using AI-powered solutions may not be subject to copyright protection, which may adversely
affect our ability to commercialize or use, or the validity or enforceability of any intellectual property rights in, such content or
other output. In addition, AI technology may present new vulnerabilities of our business to cyber threats, as they serve additional means
and methods to facilitate attacks by bad actors, that can easily access generative AI to create such threats. The use of AI by other companies
has resulted in, and our use of AI may in the future result in, cyber-attacks, cybersecurity breaches, service outages or other similar
incidents, including those that implicate the confidential and personal information of users of AI-powered solutions. If any of our employees,
contractors, third-party providers or other third parties with whom we partner input confidential or personal information while using
any third-party AI-powered solution in connection with our business or the products, solutions and services they provide to us, such practice
may lead to the inadvertent disclosure of such confidential or personal information, which may impact our ability to realize the benefit
of, or adequately obtain, maintain, protect, defend, and enforce our intellectual property in, such information or otherwise harm our
competitive position, reputation or business. Any of the foregoing could adversely affect our reputation and expose us to legal liability
or regulatory risks, including with respect to third-party intellectual property or privacy, publicity, contractual or other rights.
Regulation of AI is rapidly evolving worldwide as legislatures and regulators are
increasingly focusing on these emerging technologies. For example, the European Union’s Artificial Intelligence Act (the “AI
Act”), which entered into force on August 1, 2024, establishes, among other things, a risk-based governance framework for regulating
AI systems operating in the EU. This framework categorizes AI systems, based on the risks associated with such AI systems’ intended
purposes, as creating unacceptable or high risks, with all other AI systems being considered limited or low risk. There is a risk that
our current or future AI-powered solutions may obligate us to comply with the applicable requirements of the AI Act, which may impose
additional costs on us, increase our risk of liability and fines or otherwise adversely affect our business, results of operations, financial
condition and future prospects.
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Further, in the EU, we are subject to the GDPR, which regulates our use of personal
data for automated decision-making that results in a legal or similarly significant effect on an individual, and provides rights to individuals
in respect of that automated decision-making. Recent case law from the Court of Justice of the European Union has taken an expansive view
of the scope of the GDPR’s requirements around automated decision-making and introduced uncertainty in the interpretation of these
rules. The legal obligations in this area may affect our use of AI and our ability to provide, improve or commercialize our solutions,
products and services may require additional compliance measures and changes to our operations and processes, and result in increased
compliance costs and potential increases in civil claims against us, any of which could adversely affect our business, results of operations,
financial condition and future prospects. See “—We are subject to data privacy laws, including the European Union’s
General Data Protection Regulation, and any failure by us to comply could result in proceedings or actions against us and subject us to
significant fines, penalties, judgments and negative publicity.”
It is possible that new laws and regulations will be adopted in Israel and other jurisdictions,
or that existing laws and regulations may be interpreted in ways that could affect our use and provision of AI in our products, services,
business and operations generally. We may not be able to adequately anticipate or respond to these evolving laws and regulations, and
we may need to expend additional resources to adjust our products, solutions and services in certain jurisdictions if applicable legal
frameworks are inconsistent across jurisdictions. The cost to comply with such laws or regulations could be significant and may increase
our operating expenses, and we could incur liability resulting from the violation of applicable laws and regulations as well as contracts
to which we are a party or civil claims.
Further, public and regulatory focus on ethical use and privacy and cybersecurity
concerns regarding AI could lead to reputational damage if we fail, or are perceived to fail, to align with societal expectations or regulatory
standards relating to the use of AI. Such scrutiny may result in financial or other penalties and may also erode customer trust, which
is crucial for our long-term success. Although we have taken, and continue to take, steps designed to mitigate the risks associated with
the use of AI in our business and operations, including, among other things, engaging with regulatory bodies, investing in compliance
infrastructure and the adoption of relevant procedures, requiring human involvement in the training and monitoring of our AI-powered solutions,
aligning our AI development policies and procedures with guidelines for secure development practices, and fostering transparent and ethical
use of AI in our products, solutions and services, our use of AI may present ethical, reputational, technical, operational, legal, competitive
and regulatory risks, any of which could adversely affect our business, financial condition and results of operations. Furthermore, the
technologies underlying AI are complex and rapidly developing and, as a result, it is not possible to predict all of such risks related
to our current or future use of AI. We expect our use of AI will require additional resources, including the incurrence of additional
costs, to develop and maintain our products and services to minimize potentially harmful or unintended consequences, to comply with applicable
and emerging laws and regulations, to maintain or extend our competitive position, and to address any ethical, reputational, technical,
operational, legal, competitive or regulatory issues which may arise as a result of any of the foregoing.
Labor shortages or disruptions could have an
adverse effect on our business and reputation.
We employ, directly and indirectly, approximately 6,785 employees around the globe
(including contract workers) as of December 31, 2025. We, our subsidiaries, and the independent agencies with which we have agreements
could experience strikes, industrial unrest or work stoppages. Several of our employees are members of unions. In recent years, we have
experienced labor interruptions as a result of disagreements between management and unionized employees and have entered into collective
bargaining agreements addressing certain of these concerns. Furthermore, we have experienced labor interruptions as a result of disagreements
with our unionized employees following the entry into the Merger Agreement with Hapag-Lloyd AG and see “Risk factors related to
the Merger Agreement with Hapag-Lloyd AG”. If disagreements arise or accelerate and are not resolved in a timely and cost-effective
manner, such labor conflicts could have a material adverse effect on our business and reputation. Disputes with our unionized employees
may result in work stoppage, strikes and time-consuming litigation. Our collective bargaining agreements include termination procedures
which affect our managerial flexibility with re-organization procedures and termination procedures. In addition, our collective bargaining
agreements affect our financial liabilities towards employees, including because of pension liabilities or other compensation terms.
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We incur increased costs as a result of operating
as a public company, and our management team, which has limited experience in managing and operating a company that is publicly traded
in the U.S., will be required to devote substantial time to new compliance initiatives.
As a public company whose ordinary shares have been listed in the United States since
January 2021, we incur accounting, legal and other expenses that we did not incur as a private company, including costs associated with
our reporting requirements under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). We also incur
costs associated with corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley
Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the NYSE, and provisions of Israeli corporate laws
applicable to public companies. These rules and regulations, including enhanced ESG reporting requirements, have increased our legal and
financial compliance costs, introduced new costs such as investor relations and stock exchange listing fees, and make some activities
more time-consuming and costly. In addition, our senior management and other personnel must divert attention from operational and other
business matters to devote substantial time to these public company requirements. Our current management team has limited experience managing
and operating a company that is publicly traded in the U.S. Failure to comply or adequately comply with any laws, rules or regulations
applicable to our business may result in fines or regulatory actions, which may adversely affect our business, results of operation or
financial condition and could result in delays in achieving or maintaining an active and liquid trading market for our ordinary shares.
Changes in the laws and regulations affecting public companies could result in increased
costs to us as we respond to such changes. These laws and regulations could make it more difficult or more costly for us to obtain certain
types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage
and/or incur substantially higher costs to obtain the same or similar coverage, including increased deductibles. The impact of these requirements
could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees
or as executive officers. We cannot predict or estimate the amount or timing of additional costs we may incur in order to comply with
such requirements. Any of these effects could adversely affect our business, financial condition and results of operations.
Risks related to our ordinary shares
Our share price may be volatile, and you may
lose all or part of your investment.
The market price of our ordinary shares could be highly volatile and may fluctuate
substantially as a result of many factors, including:
• actual or anticipated variations in our or our competitors’ results of operations and financial condition;
• variations in our financial performance or operating results from the expectations of market analysts;
• announcements by us or our competitors of significant business developments, changes in service provider relationships, acquisitions or strategic alliances, or expansion plans;
• our involvement in litigation;
• our sale of ordinary shares or other securities in the future;
• market conditions in our industry, which traditionally have been volatile;
• changes in key personnel;
• the trading volume of our ordinary shares;
• changes in government regulation;
• changes in the estimation of the future size and growth rate of our markets; and
• general economic and market conditions.
The shipping and offshore industries have been highly unpredictable and volatile.
The market for shares of companies who operate in these industries may be equally volatile. In addition, the stock markets generally have
experienced extreme price and volume fluctuations, which have been enhanced by the volatility of the industry in which we operate.
Broad market and industry factors may materially harm the market price of our ordinary
shares, regardless of our operating performance. Consequently, you may not be able to sell the ordinary shares at prices equal to or greater
than those paid by you, or you may not be able to sell them at all. In the past, following periods of volatility in the market price of
a company’s securities, securities class action litigation has often been instituted against that company. If we were involved in
any similar litigation, we could incur substantial costs and our management’s attention and resources could be diverted, which could
affect our business, financial condition and results of operations.
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If securities or industry analysts do not publish
research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.
The trading market for our ordinary shares depends, in part, upon the research and
reports that securities or industry analysts publish about us or our businesses. We do not have any control over analysts as to whether
they will cover us, and if they do, whether such coverage will continue. If one or more of the analysts covering us cease coverage of
our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price
or trading volume of our shares to decline. In addition, if one or more of the analysts who cover us downgrade our shares or change their
opinion of our shares, the price for our shares will likely decline.
Future sales of our ordinary shares or the
anticipation of future sales could reduce the market price of our ordinary shares.
If we or our existing shareholders sell a substantial number of our ordinary shares
in the public market, the market price of our ordinary shares could decrease significantly. The perception in the public market that our
shareholders might sell our ordinary shares could also depress the market price of our ordinary shares and could impair our future ability
to obtain capital, especially through an offering of equity securities. Substantially all of our outstanding ordinary shares are eligible
for sale in the public market, except that ordinary shares held by our affiliates are subject to restrictions on volume and manner of
sale pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). We have also filed a registration
statement on Form S-8 with the SEC, covering all of the ordinary shares issuable under our share incentive plans and such shares are available
for resale following the expiration of any restrictions on transfer. In addition, a sale by us of additional ordinary shares or similar
securities in order to raise capital might have a similar negative impact on the share price of our ordinary shares. A decline in the
price of our ordinary shares might impede our ability to raise capital through the issuance of additional ordinary shares or other securities
and may cause you to lose part or all of your investment in our ordinary shares.
We do not have a controlling or a dominant
shareholder, which may expose us to adverse consequences.
As of March 1, 2026, no single shareholder beneficially owns more than 10% of our
ordinary shares. Due to the absence of a controlling shareholder, we may be subject to future alliances or agreements between some of
our shareholders, which may result in the exercise of a controlling or dominant power over our company by them. We have been subject to
a demand to propose the appointment of new board members during our 2025 annual shareholders meeting and see – “Our business
could be negatively affected as a result of actions of activist shareholders and/or class action filings, which could impact the trading
value of our securities.” In the event a controlling group is formed and decides to exercise its controlling power over our company,
we may be subject to unexpected changes in our corporate governance and strategies, including the replacement of directors and key executive
officers. Additionally, we may be more vulnerable to a hostile takeover bid. Any unexpected change in our management team, business policy
or strategy, any dispute between our shareholders, or any attempt to acquire control of our company may have an adverse impact on our
business, financial conditions and results of operations. Although the Special State Share places certain requirements and restrictions
on the ability of shareholders to obtain control over us, such attempts may still be successful if made pursuant to the provisions of
applicable laws and our articles of association. For information regarding our entering into a merger agreement with Hapag-Lloyd AG for
the purchase of all of our ordinary shares, see “Item 10.C “Material Contracts - Entry Into Agreement and Plan of Merger with
Hapag-Lloyd AG”.
As a foreign private issuer, we are permitted,
and intend, to follow certain home country corporate governance practices instead of otherwise applicable NYSE requirements, which may
result in less protection than is accorded to investors under rules applicable to U.S. domestic issuers.
As a foreign private issuer, in reliance on NYSE rules that permit a foreign private
issuer to follow the corporate governance practices of its home country, we are permitted to follow certain Israeli corporate governance
practices instead of those otherwise required under the corporate governance standards for U.S. domestic issuers. We follow certain Israeli
home country corporate governance practices rather than the requirements of the NYSE including, for example, to have a nominating committee
or to obtain shareholder approval for certain issuances to related parties or the establishment or amendment of certain equity-based compensation
plans. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed
on the NYSE may provide less protection than is accorded to investors in U.S. domestic issuers. See “Item 6.C – Board practices.”
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As a foreign private issuer, we are not subject
to the provisions of Regulation FD or U.S. proxy rules and are exempt from filing certain Exchange Act reports, which could result in
our shares being less attractive to investors.
As a foreign private issuer, we are exempt from a number of requirements under U.S.
securities laws that apply to public companies that are not foreign private issuers. In particular, we are exempt from the rules and regulations
under the Exchange Act related to the furnishing and content of proxy statements, however as of March 2026 we will become subject to reporting
provisions contained in Section 16(a) of the Exchange Act, as applicable to foreign private issuers. In addition, we are not required
under the Exchange Act to file annual and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic
companies whose securities are registered under the Exchange Act and we are generally exempt from filing quarterly reports with the SEC
under the Exchange Act. We are also exempt from the provisions of Regulation FD, which prohibits the selective disclosure of material
nonpublic information to, among others, broker-dealers and holders of a company’s securities under circumstances in which it is
reasonably foreseeable that the holder will trade in the company’s securities on the basis of the information. Even though we have
voluntarily filed and intend to continue to voluntarily file current reports on Form 6-K that include quarterly financial statements,
and we have adopted a procedure to voluntarily comply with Regulation FD, these exemptions and leniencies reduce the frequency and scope
of information and protections to which you are entitled as an investor.
We are not required to comply with the proxy rules applicable to U.S. domestic companies,
including the requirement to disclose the compensation of our Chief Executive Officer, Chief Financial Officer and three other most highly
compensated executive officers on an individual, rather than on an aggregate, basis. Nevertheless, regulations promulgated under the Companies
Law require us to disclose in the notice convening an annual general meeting (unless previously disclosed in any report by us prepared
pursuant to the requirements of NYSE or any other stock exchange on which our shares are registered for trade) the annual compensation
of our five most highly compensated officers on an individual basis, rather than on an aggregate basis. This disclosure will not be as
extensive as that required of a U.S. domestic issuer. For information regarding reliefs relating to general meetings for companies whose
securities are traded outside of Israeli, see “Item 6.C – Board practices – Amendment to Companies Regulations (Reliefs
for Companies whose Securities are Traded Outside of Israel), 2000”.
We would lose our foreign private issuer status if a majority of our shares became
held by U.S. persons and either a majority of our directors or executive officers are U.S. citizens or residents or we fail to meet additional
requirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory
provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us
under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required
to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive
than the forms available to a foreign private issuer. We would also be required to follow U.S. proxy disclosure requirements. We may also
be required to modify certain of our policies to comply with good governance practices associated with U.S. domestic issuers. Such conversion
and modifications will involve additional costs. In addition, we would lose our ability to rely upon exemptions from certain corporate
governance requirements on U.S. stock exchanges that are available to foreign private issuers.
If we are classified as a passive foreign investment
company, U.S. investors could be subject to adverse U.S. federal income tax consequences.
Companies, or PFICs, can have adverse effects for U.S. investors for U.S. federal
income tax purposes. The tests for determining PFIC status for a taxable year depend upon the relative values of certain categories of
assets and the relative amounts of certain kinds of income. As discussed in “Taxation – U.S. federal income taxation –
Passive Foreign Investment Company Rules,” we believe that we were not a PFIC for the taxable year ended December 31, 2025. However,
there can be no assurance that the Internal Revenue Service, or the IRS, will agree with our conclusion. In addition, the determination
of whether we are a PFIC depends on particular facts and circumstances (such as the valuation of our assets, including intangible assets,
which may be determined, in part, by reference to the market price of our ordinary shares) and may also be affected by the application
of the PFIC rules, which are subject to differing interpretations. In light of the foregoing, no assurance can be provided that we were
not a PFIC for the taxable year ended December 31, 2025 or that we will not become a PFIC in any future taxable year. Furthermore, if
we are treated as a PFIC, then one or more of our subsidiaries may also be treated as PFICs.
If we are or become a PFIC for any taxable year during which a U.S. investor holds
our ordinary shares, we generally would continue to be treated as a PFIC with respect to that U.S. investor for all succeeding years during
which the U.S. investor holds our ordinary shares, even if we ceased to meet the threshold requirements for PFIC status, unless certain
exceptions apply. Such a U.S. investor may be subject to adverse U.S. federal income tax consequences, such as ineligibility for any preferential
tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting
requirements under U.S. federal income tax laws and regulations. A “mark-to-market” election may be available that will alter
the consequences of PFIC status if our ordinary shares are regularly traded on a qualified exchange. For further discussion, see “Taxation
– U.S. federal income taxation – Passive Foreign Investment Company Rules.” Investors should consult their own tax advisors
regarding all aspects of the application of the PFIC rules to our ordinary shares.
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If we are unable to maintain effective internal
control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports
and the market price of our ordinary shares could be negatively affected.
As a public company, we are required to maintain internal controls over financial
reporting and to report any material weaknesses in such internal controls. We are required to furnish a report by management on the effectiveness
of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. If we identify material weaknesses
in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner or
assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable
to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy
and completeness of our financial reports and the market price of our ordinary shares could be negatively affected, and we could become
subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could
require additional financial and management resources.
Our dividend policy is subject to change at
the discretion of our Board of Directors and there is no assurance that our Board of Directors will declare dividends in accordance with
this policy.
Our Board of Directors has adopted a dividend policy, which was amended in August 2022, to distribute a
dividend to our shareholders on a quarterly basis at a rate of 30% of the net quarterly income of each of the first three fiscal quarters
of the year, while the cumulative annual dividend amount to be distributed by the Company (including the interim dividends paid during
the first three fiscal quarters of the year) will total 30-50% of the annual net income, all subject to our Board of Directors absolute
discretion at the time of any such distribution, and the satisfaction of the applicable relevant tests under the Israeli Companies Law
at the time of these distributions. In accordance with the terms and covenants of the Merger Agreement we entered into with Hapag-Lloyd
AG, following the signing of this agreement and until the closing of the Merger we will not distribute dividends except as in accordance
with this dividend policy. On March 8, 2026, our Board of Directors approved the distribution of a cash dividend in an aggregate amount
of approximately $106 million, or $0.88 per ordinary share, to be paid on March 26, 2026, to holders of our ordinary shares as of March
20, 2026. During the 2025 fiscal year, we paid cash dividends on April 3, 2025, June 9, 2025, September 9, 2025, and December 8, 2025,
in an aggregate amount of approximately $515 million, or $4.28 per ordinary share. We have also paid cash dividends in prior years. In
2024, we paid cash dividends of approximately $579 million, or $4.81 per ordinary share, and in 2023, we paid a cash dividend in an amount
of approximately $769 million, or $6.40 per ordinary share.
Any dividends must be declared by our Board of Directors, which will take into account
various factors including our profits, our investment plan, our financial position and additional factors it deems appropriate. While
we initially intend to distribute 30 - 50% of our annual net income, the actual payout ratio could be anywhere from 0% to 50% of our net
income, and may fluctuate depending on our cash flow needs and such other factors. There can be no assurance that dividends will be declared
in accordance with our Board’s policy or at all, and our Board of Directors may decide, in its absolute discretion, at any time
and for any reason, not to pay dividends, to reduce the amount of dividends paid, to pay dividends on an ad-hoc basis or to take other
actions, which could include share buybacks, instead of or in addition to the declaration of dividends. Accordingly, we expect that the
amount of any cash dividends we distribute will vary significantly as a result of such factors. We have not adopted a separate written
dividend policy to reflect our Board’s policy.
Our ability to pay dividends is limited by Israeli law, which permits the distribution of dividends only
out of distributable profits (subject to limited exceptions) and only if there is no reasonable concern that such distribution will prevent
us from meeting our existing and future obligations when they become due. See “Item 8.A – Consolidated statements and other
financial information – Dividends and dividend policy.”
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