424B4 1 tm2031687-15_424b4.htm 424B4 tm2031687-15_424b4 - none - 44.0749346s
  Filed Pursuant to Rule 424(b)(4)
 Registration No. 333-251822
PROSPECTUS
14,500,000 Ordinary Shares
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ZIM Integrated Shipping Services Ltd.
This is ZIM Integrated Shipping Services Ltd.’s initial public offering. We are selling 14,500,000 of our ordinary shares.
The initial public offering price is $15.00 per share. Prior to this offering, there has been no public market for our ordinary shares. We have been approved to list our ordinary shares on the New York Stock Exchange (“NYSE”) under the symbol “ZIM.”
Investing in our ordinary shares involves risks. See “Risk factors” beginning on page 18 to read about certain factors you should carefully consider before deciding to invest in our ordinary shares.
Per Share
Total
Public offering price
$ 15.00 $ 217,500,000
Underwriting discounts and commissions(1)
$ 1.14 $ 16,530,000
Proceeds to us (before expenses)
$ 13.86 $ 200,970,000
(1)
See “Underwriting” for a description of compensation payable to the underwriters and reimbursement of expenses.
The underwriters may also exercise their option to purchase up to an additional 2,175,000 ordinary shares from us, at the initial public offering price, less the underwriting discount, for 30 days after the date of this prospectus.
Neither the Securities and Exchange Commission, or the SEC, nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares to purchasers on or about February 1, 2021.
Global Coordinators
Citigroup
Goldman Sachs & Co. LLC
Barclays
Joint Bookrunners
Jefferies
Clarksons Platou Securities
The date of this prospectus is January 27, 2021.

 
TABLE OF CONTENTS
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F-1
Neither we nor the underwriters have authorized anyone to provide information different from that contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by us or on our behalf. Neither we nor the underwriters take any responsibility for, and can provide no assurance as to the reliability of, any information other than the information in this prospectus, any amendment or supplement to this prospectus, and any free writing prospectus prepared by us or on our behalf. Neither the delivery of this prospectus nor the sale of our ordinary shares means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy these ordinary shares in any circumstances under which such offer or solicitation is unlawful.
For investors outside the United States: neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction, other than the United States, where action for that purpose is required. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our ordinary shares and the distribution of this prospectus outside the United States.
 

 
INDUSTRY AND MARKET DATA
This prospectus includes statistical data, market data and other industry data and forecasts, which we obtained from market research, publicly available information and independent industry publications and reports that we believe to be reliable sources, although we have not verified the accuracy and completeness of such data. In particular, we present certain data and/or forecasts in this prospectus that have been obtained from (i) Alphaliner (including the Alphaliner Monthly Monitor published monthly through October 2020), (ii) PIERS & CTS (including PIERS Enterprize by IHS Markit January – July 2020, Container Trade Statistics January – June 2020 and PIERS Enterprize by IHS Markit as of November 2020), (iii) Glassdoor as of November 2020, (iv) Ipsos (including the Customer Experience Survey 2019, November – December 2019 and the Brand Positioning in the Shipping Industry, September 2019) (v) IHS Markit (including the Netherlands Institute for Transport Policy Analysis (KIM) published in April 2020), (vi) Clarksons (including Idle Containership Capacity published in August 2020 and Research Container Intelligence Monthly as of October 2020), (vii) Drewry Container Forecaster as of October 2020, (viii) SeaIntel Global Liner Performance, October 2020), (ix) Port of Vancouver (Container TEU Market Share, July 2020) and (x) Prince Rupert Port Authority (Steamship Line Report, July 2020). Certain of these publications, studies and reports were published before the COVID-19 pandemic and therefore do not reflect any impact of COVID-19 on any specific market or globally.
In addition, certain of our estimates are derived from our internal research and studies, and are based on such data and our knowledge of our industry, forecasts and other forward-looking information derived from such sources or from our internal research. Such estimates, forecasts and other forward-looking information that are included in this prospectus are subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this prospectus. See “Special note regarding forward-looking statements.”
TRADEMARKS, SERVICE MARKS AND TRADE NAMES
Throughout this prospectus, we refer to various trademarks, service marks and trade names that we use in our business. The “ZIM” logo is the property of ZIM Integrated Shipping Services Ltd. ZIM® is our registered trademark in the United States. We have several other trademarks and service marks. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the “®” or “™” trademark designations. All rights to such trademarks are nevertheless reserved, and other trademarks and service marks appearing in this prospectus are the property of their respective holders.
 
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GLOSSARY OF SHIPPING TERMS
The following are definitions of certain terms that are commonly used in the shipping industry and in this prospectus.
“alliance” An operational agreement among two or more container shipping companies that governs the sharing of a vessel’s capacity and related operational matters across multiple trades.
“bareboat charter” A form of charter where the vessel owner supplies only the vessel, while the charterer is responsible for crewing the vessel, obtaining insurance on the vessel, the auxiliary vessel equipment, supplies, maintenance and the operation and management of the vessel, including all costs of operation. The charterer has possession and control of the vessel during a predetermined period and pays the vessel owner charter hire during that time.
“bill of lading” A document issued by or on behalf of a carrier as evidence of a contract carriage and is usually considered as a document of title (transferable by endorsement) and as receipt by the carrier for the goods shipped and carried. The document contains information relating to the nature and quantity of goods, their apparent condition, the shipper, the consignee, the ports of loading and discharge, the name of the carrying vessel and terms and conditions of carriage. A house bill of lading is a document issued by a freight forwarder or non-vessel operating common carrier that acknowledges receipt of goods that are to be shipped and is issued once the goods have been received.
“blank sailing” A scheduled sailing that has been cancelled by a carrier or shipping line resulting in a vessel skipping certain ports or the entire route.
“booking” Prior written request of a shipper (in a specific designated form) from the carrier setting forth the requested details of the shipment of designated goods (i.e., a space reservation).
“bulk cargo” Cargo that is transported unpackaged in large quantities, such as ores, coal, grain and liquids.
“BWM Convention” The International Convention for the Control and Management of Ships’ Ballast Water and Sediments.
“capacity” The maximum number of containers, as measured in TEUs, that could theoretically be loaded onto a container ship, without taking into account operational constraints. With reference to a fleet, a carrier or the container shipping industry, capacity is the total TEUs of all vessels in the fleet, the carrier or the industry, as applicable.
“cargo manifest” A shipping document listing the contents of shipments per bills of lading including their main particulars, usually used for customs, security, port and terminal purposes.
“carrier” The legal entity engaged directly or through subcontractors in the carriage of goods for a profit.
“CERCLA” The U.S. Comprehensive Environmental Response Compensation, and Liability Act.
“CGU” Cash generating unit.
“charter” The leasing of a vessel for a certain purpose at a fixed rate for a fixed period of time (where the hire is an agreed daily rate) or for a designated voyage (where the hire is agreed and based on volume/quantity of goods).
 
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“classification societies” Organizations that establish and administer standards for the design, construction and operational maintenance of vessels. As a practical matter, vessels cannot operate unless they meet these standards.
“conference” A grouping of container shipping companies which come together to set a common structure of rates and surcharges for a specific trade route.
“consignee” The entity or person named in the bill of lading as the entity or person to whom the carrier should deliver the goods upon surrendering of the original bill of lading when duly endorsed.
“container” A steel box of various size and particulars designed for shipment of goods.
“containerized cargo” Cargo that is transported using standard intermodal containers as prescribed by the International Organization for Standardization. Containerized cargo excludes cargo that is not transported in such containers, such as automobiles or bulk cargo.
“customs clearance” The process of clearing import goods and export goods through customs.
“demurrage” The fee we charge an importer for each day the importer maintains possession of a container that is beyond the scheduled or agreed date of return.
“depot” Container yards located outside terminals for stacking of containers.
“detention” A penalty charge which may be imposed by the carrier, the terminal or the warehouse to customers for exceeding agreed times for returning (merchant’s haulage) or stuffing/stripping (carrier’s haulage) container(s).
“dominant leg” The direction of shipping on a particular trade with the higher transport volumes. The opposite direction of shipping is called the “counter-dominant” leg.
“drydocking” An out-of-service period during which planned repairs and maintenance are carried out, including all underwater maintenance such as external hull painting. During the drydocking, mandatory classification society inspections are carried out and relevant certifications issued.
“ECAs” Emission Control Areas as defined by Annex VI to the MARPOL Convention.
“end-user” A customer who is a producer of the goods to be shipped or an exporter or importer of such goods, in each case, with whom we have a direct contractual relationship. In contrast, with respect to an indirect customer, we only have a contractual relationship with a freight forwarder who acts as agent for the producer of the goods to be shipped.
“EPA” The U.S. Environmental Protection Agency, an agency of the U.S. federal government responsible for protecting human health and the environment.
“FCL” Full Container Load, which refers to cargo shipped in a complete container.
“feeder” A small tonnage vessel that provides a linkage between ports and long hull vessels or main hub ports and smaller facility ports, which may be inaccessible to larger vessels.
 
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“feeder service” A line of service that transfers cargo between a central hub port and regional ports for a transcontinental ocean voyage.
“freight forwarder” Non-vessel operating common carriers that assemble cargo from customers for forwarding through a shipping company.
“GDP” Gross domestic product.
“global orderbook”
The list of newbuilding orders published by Danish Ship Finance A/S
“hybrid charter” A form of charter where the charterer’s responsibility and involvement is more in line with that of a “bareboat” charter, but the vessel owner retains possession of the vessels and other rights as defined in the charter party agreement.
“IMO” The International Maritime Organization, the United Nations specialized agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships.
“IMO 2020 Regulations” Global regulations imposed by the IMO, effective January 1, 2020, requiring all ships to burn fuel with a maximum sulfur content of 0.5%, among other requirements.
“ISM Code” International Safety Management Code, an international code for the safe management and operation of ships and for pollution prevention issued by the IMO applicable to international route vessels and shipping companies (ship management companies, bareboat charters and shipowners).
“ISPS Code” International Ship and Port Facility Security Code, an international code for vessel and port facility security issued by the IMO applicable to international route vessels.
“JWC” The Joint War Committee.
“Kyoto Protocol” The Kyoto Protocol to the United Nations Framework Convention on Climate Change.
“LCL” Less than a Container Load, which refers to shipments that fill less than a full shipping container and are grouped with other cargo.
“liner” A vessel sailing between specified ports on a regular basis.
“lines” A line refers to a route for shipping cargo between sea ports.
“logistics” A comprehensive, system-wide view of the entire supply chain as a single process, from raw materials supply through finished goods distribution. All functions that make up the supply chain are managed as a single entity, rather than managing individual functions separately.
“long-term lease” In relation to container leasing, a lease typically for a term of five to ten years, during which an agreed leasing rate is payable.
“MARPOL Convention” The International Convention for the Prevention of Pollution from Ships.
“MEPC” The Marine Environment Protection Committee of the IMO.
“MTSA” The US Maritime Transport Security Act of 2002.
“newbuilding” A vessel under construction or on order.
“non-dominant leg”, or “counter-dominant leg” The direction of shipping on a particular trade with the lower transport volumes. The opposite direction of shipping is called the “dominant” leg.
“non-vessel operating common carrier” A carrier, usually a freight forwarder, which does not own or operate vessels and is engaged in the provision of shipping services, normally issuing a house bill of lading.
 
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“off hire” A period within a chartering term during which no charter hire is being paid, in accordance with the charter arrangement, due to the partial or full inability of vessels, owners or crew to comply with charterer instructions resulting in the limited availability or unavailability of the vessel for the use of the charterer.
“own” With respect to our vessels or containers, vessels or containers to which we have title (whether or not subject to a mortgage or other lien) or that we charter-in pursuant to a long-term lease that we treat, for accounting purposes, as a capital lease.
“P&I” Protection and indemnity.
“port state controls” The inspection of foreign ships in national ports to verify that the condition of the ship and its equipment comply with the requirements of international regulations and that the ship is manned and operated in compliance with these rules.
“reefer” A temperature-controlled shipping container.
“regional carrier” A carrier who generally focuses on a number of smaller routes within a geographical region or within a major market, and usually offers direct services to a wider range of ports within a particular market.
“scrapping” The process by which, at the end of its life, a vessel is sold to a shipbreaker who strips the ship and sells the steel as “scrap.”
“scrubbers” A type of exhaust gas cleaning equipment utilized by ships to control emissions.
“service” A string of vessels which makes a fixed voyage and serves a particular market.
“Shanghai (Export) Containerized Freight Index” Composite index published by the Shanghai Shipping Exchange that reflects the fluctuation of spot freight rates in the export container transport market in Shanghai. The basis period of the composite index is October 16, 2009 and the basis index is 1,000 points.
“shipper” The entity or person named in the bill of lading to whom the carrier issues the bill of lading.
“slot” The space required for one TEU on board a vessel.
“slot capacity” The amount of container space on a vessel.
“slot charter/hire agreement” An arrangement under which one container shipping company will charter container space on the vessel of another container shipping company.
“slow steaming” The practice of operating vessels at significantly less than their maximum speed.
“SOLAS” The International Convention for the Safety of Life at Sea, 1974.
“SSAS” Ship Security Alert Systems.
“STCW” The International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended.
“stevedore” A terminal operator or a stevedoring company who is responsible for the loading and discharging containers on or from vessels and various other container related operating activities.
“swap agreement” An exchange of slots between two carriers, with each carrier operating its own line, while also having access to capacity on the other shipper’s line.
“terminal” An assigned area in which containers are stored pending loading into a vessel or are stacked immediately after discharge from the vessel pending delivery.
 
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“TEU” Twenty-foot equivalent unit, a standard unit of measurement of the volume of a container with a length of 20 feet, height of 8 feet and 6 inches and width of 8 feet.
“time charter” A form of charter where the vessel owner charters a vessel’s carry capacity to the charterer for a particular period of time for a daily hire. During such period, the charterer has the use of vessel’s carrying capacity and may direct her sailings. The charterer is responsible for fuel costs, port dues and towage costs. The vessel owner is only responsible for manning the vessel and paying crew salaries and other fixed costs, such as maintenance, repairs, oils, insurance and depreciation.
“trade” Trade between an origin group of countries and a destination group of countries.
“UNCITRAL” The United Nations Commission on International Trade Law.
“U.S. Shipping Act” The U.S. Shipping Act of 1984, as amended by the US Ocean Shipping Reform Act of 1998.
“vessel sharing agreement” An operational agreement between two or more carriers to operate their vessels on a service by swapping slots on such service and whereby at least two carriers contribute vessels to the service.
“2M Alliance” A container shipping alliance comprised of Copenhagen based Maersk Lines Ltd. (Maersk) and Geneva based Mediterranean Shipping Company (MSC).
 
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PROSPECTUS SUMMARY
This summary does not contain all of the information you should consider before investing in our ordinary shares. You should read the entire prospectus carefully, including “Risk factors,” “Selected consolidated financial and other data,” “Management’s discussion and analysis of financial condition and results of operations,” “Business” and our consolidated financial statements and the related notes included at the end of this prospectus, before making an investment in our ordinary shares. Unless otherwise indicated, references to “ZIM,” “we,” “us,” “our,” the “company” or similar terms when used in a historical context refer to ZIM Integrated Shipping Services Ltd., or any one or more of its subsidiaries or their predecessors, or to such entities collectively. The terms “shekels,” “Israeli shekels” and “NIS” refer to the lawful currency of the State of Israel, and the terms “dollar,” “US$” or “$” refer to the lawful currency of the United States. Unless derived from our financial statements or otherwise indicated, U.S. dollar translations of NIS amounts presented in this prospectus are translated using the rate of NIS 3.441 to US$1.00, the exchange rate reported by the Bank of Israel on September 30, 2020. For definitions of certain terms that are commonly used in the shipping industry and in this prospectus, see “Glossary of shipping terms.”
Our company
We are a global, asset-light container liner shipping company with leadership positions in niche markets where we believe we have distinct competitive advantages that allow us to maximize our market position and profitability. Founded in Israel in 1945, we are one of the oldest shipping liners, with over 75 years of experience, providing customers with innovative seaborne transportation and logistics services with a reputation for industry leading transit times, schedule reliability and service excellence.
Our main focus is to provide best-in-class service for our customers while maximizing our profitability. We have positioned ourselves to achieve industry-leading margins and profitability through our focused strategy, commercial excellence and enhanced digital tools. As part of our “Innovative Shipping” vision, we rely on careful analysis of data, including business and artificial intelligence, to better understand the needs of our customers and digitize our products accordingly, without compromising our personal touch. We operate and innovate as a truly customer-centric company, constantly striving to provide a best-in-class product offering. Our asset-light model, which differentiates us relative to our competition, enables us to benefit from a flexible cost structure and operational efficiency. This, in turn, increases profitability and allows us to better serve our customers. As of September 30, 2020, we operated a fleet of 70 vessels and chartered-in 98.5% of our TEU capacity and 98.6% of the vessels in our fleet. For comparison, according to Alphaliner, our competitors chartered-in on average approximately 56% of their fleets.
We operate across five geographic trade zones that provide us with a global footprint. These trade zones include (for the nine months ended September 30, 2020): (1) Transpacific (39% of carried TEUs), (2) Atlantic (22%), (3) Cross Suez (12%), (4) Intra-Asia (21%) and (5) Latin America (6%). Within these trade zones, we strive to increase and sustain profitability by selectively competing in niche trade lanes where we believe that the market is underserved and that we have a competitive advantage versus our peers. These include both trade lanes where we have an in-depth knowledge, long-established presence and outsized market position as well as new trade lanes into which we are often driven by demand from our customers as they are not serviced in-full by our competitors. Several examples of niche trade lanes within our geographic trade zones include: (1) US East Coast & Gulf to Mediterranean lane (Atlantic trade zone) where we maintain a 14% market share, (2) East Mediterranean & Black Sea to Far East lane (Cross Suez trade zone), 11% market share and (3) Far East to US East Coast (Pacific trade zone), 10% market share, in each case according to the Port Import/Export Reporting Service (PIERS) and Container Trade Statistics (CTS). In response to the growing trend in eCommerce, we recently launched two new, premium high speed services called ZIM eCommerce Xpress (ZEX), which moves freight from China to Los Angeles, and ZIM China Australia Express (CAX), which moves freight from China to Australia. These solutions for time-sensitive cargo, which provide a compelling alternative to air freight, illustrate our agility and ability to quickly and efficiently execute in new niche lanes where we can offer a unique product and become the carrier of choice for our customers.
 
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As of September 30, 2020, we operated a global network of 66 weekly lines, calling at 310 ports in more than 80 countries. Our complex and sophisticated network of lines allows us to be agile as we identify markets in which to compete. Within our global network we offer value-added and tailored services, including operating several logistics subsidiaries to provide complimentary services to our customers. These subsidiaries, which we operate in China, Vietnam, Canada, Brazil, India and Singapore, are asset-light and provide services such as land transportation, custom brokerage, LCL, project cargo and air freight services. Out of ZIM’s total volume in the nine months ended September 30, 2020, approximately 26% of our TEUs carried utilized additional elements of land transportation.
As of September 30, 2020, we chartered-in nearly all of our capacity; in addition, 78.3% of our chartered-in vessels are under leases having a remaining charter duration of one year or less (or 71.2% in terms of TEU capacity). Our short-term charter arrangements allow us to adjust our capacity quickly in anticipation of, or in response to, changing market conditions, including as we continue to adjust our operations in response to the ongoing COVID-19 pandemic. Our fleet, both in terms of the size of our vessels and our short-term charters, enables us to optimize vessel deployment to match the needs of both mainlane and regional routes and to ensure high utilization of vessels and specific trade advantages. The majority of our vessels are from a large and liquid pool of large mid-sized vessels (3,000 to 10,000 TEUs) that are typically available for us to charter. In addition, we operate a modern and specialized container fleet, which acts as an additional value-added service offering, attracting higher yields than standard cargos.
Our network is significantly enhanced by cooperation agreements with other leading container liner companies and alliances, allowing us to maintain a high degree of agility while optimizing fleet utilization by sharing capacity, expanding our service offering and benefiting from cost savings. Such cooperation agreements include vessel sharing agreements (VSAs), slot purchase and swaps. Our strategic operational collaboration with the 2M Alliance, comprised of the two largest global carriers (Maersk and MSC), which was announced in July 2018, launched in September 2018 and further expanded in March 2019 and August 2019, allows us to provide faster and more efficient service in some of our most critical trade lanes, including Asia — US East Coast, Asia — Pacific Northwest, Asia — Mediterranean and Asia — US Gulf Coast. Our cooperation with the 2M Alliance today covers four trade lanes, 11 services and approximately 21,400 weekly TEUs. In addition to our collaboration with the 2M Alliance, we also maintain a number of partnerships with various global and regional liners in different trades. For example, in the Intra-Asia trade, we partner with both global and regional liners in order to extend our services in the region.
We have a highly diverse and global customer base with approximately 26,800 customers (which considers each of our customer entities separately, even if it is a subsidiary or branch of another customer) using our services. In 2019, our 10 largest customers represented approximately 15% of our freight revenues and our 50 largest customers represented approximately 32% of our freight revenues. One of the key principles of our business is our customer-centric approach and we strive to offer value-added services designed to attract and retain customers. Our strong reputation, high-quality service offering and schedule
 
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reliability has generated a loyal customer base, with 75% of our top 20 customers in 2019 having a relationship with the Company lasting longer than 10 years.
We have focused on improvements in our digital capabilities to enhance both commercial and operational excellence. We use our technology and innovation to power new services, improve our best-in-class customer experience and enhance our productivity and portfolio management. Several recent examples include: (i) entering into a strategic cooperation with Alibaba, via Alibaba.com, to enhance logistics services to its customers and service providers. Our innovative collaboration helps Alibaba offer its customers a more affordable transit alternative relative to air freight with a seamless and easy-to-use interface; (ii) eZQuote, a digital tool that allows customers the ability to receive instant quotes with a fixed price and guaranteed terms; (iii) Draft B/L, an online tool that allows export users to view, edit and approve their bill of lading online without speaking with a representative; and (iv) ZIMGuard, an artificial intelligence-based internal tool designed to detect possible misdeclarations of dangerous cargo in real-time.
Achieving industry leading profitability margins through both effective cost management initiatives as well as top-line improvement strategies is one of the primary focuses of our business. Over the past three years we have taken initiatives to reduce and avoid costs across our operating activities through various cost-control measures and equipment cost reduction (including, but not limited to, equipment interchanges such as swapping containers in surplus locations, street turns to reduce trucking of empty containers and domestic repositioning from inland ports). Our digital investment in our information technology systems has allowed us to develop a highly sophisticated allocation management tool that gives us the ability to manage our vessel and cargo mix to prioritize higher yielding bookings. The capacity management tool as well as our agility in terms of vessel deployment enable us to focus on the most profitable routes with our customers. The net impact has been demonstrated through our industry-leading Adjusted EBIT margins for the last 23 consecutive quarters.
In addition to effective cost management, we would not have been able to achieve our financial results without our unique organizational culture. We have implemented a new vision and values, “Z-Factor,” which is fully aligned with and supports our strategy and long-term goals. Our vision of “Innovative shipping dedicated to you!” has driven our focus on innovation and digitalization and has led us to become a truly customer-centric company. Our can-do approach and results-driven attitude support our passion for commercial excellence and drives our focus on optimizing our cargo and customer mix. Our organizational culture enables us to operate at the highest level, while also treating our oceans and communities with care and responsibility.
We are headquartered in Haifa, Israel. As of September 30, 2020, we had approximately 3,782 full-time employees worldwide. In 2019 and for the nine-month period ended September 30, 2020, we carried 2.82 million and 2.04 million TEUs, respectively, for our customers worldwide. During the same periods, our revenues were $3,300 million and $2,631 million, our net income (loss) was $(13) million and $158 million and our Adjusted EBITDA was $386 million and $504 million, respectively.
Our key strengths
We believe that we possess a number of key strengths that support our competitive position.

Leading presence in markets where we can maximize profitability.   We focus on attractive global and niche markets where we can develop sustainable competitive advantages and drive long-term profitability. We consistently re-evaluate our focus on expanding our presence or entering new trades. For example, in the Atlantic trade we maintain a significant presence in the US East Coast & Gulf to Mediterranean trade with a TEU market share of 14% as of September 30, 2020. In addition, we have a market share of 11% on the East Mediterranean & Black Sea to Far East trade (Cross Suez) and 10% on the Far East to US East Coast trade (Pacific). The flexibility of our partnership arrangements as well as the agility of our fleet create a competitive advantage that enables us to better serve our existing customers by identifying and expanding into new strategic trades that are underserved. An example of this were our two recently launched high speed services, ZEX and CAX, which developed solutions for our customers to meet the growing needs of eCommerce related time-sensitive cargo.

Asset-light business model and flexible cost structure.   We actively manage our asset mix. As of September 30, 2020, we owned one vessel, or 1.4% of our fleet, and chartered-in 69 vessels, or 98.6%
 
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of our fleet. By contrast, on average, our competitors owned 44% of their fleet and chartered-in the remaining 56%. We believe that our high proportion of chartered-in vessels allows us to maintain a sizeable fleet while limiting our capital investment requirements, improving our cash conversion and maximizing our flexibility. Further, as of September 30, 2020, 78.3% of our chartered-in vessels are under short-term leases with a remaining charter duration of less than one year. By chartering-in a significant portion of our fleet under short-term leases, we are able to adjust our fleet capacity mix to react to changing market conditions in the trades in which we operate. Moreover, the capacities of our operated vessels range from less than 1,000 TEUs to 12,000 TEUs, allowing us to service geographic trades with varying capacity requirements. For example, our smaller vessels service our Intra-Asia routes whereas our larger vessels service our Asia-USEC routes. We believe that our operated vessels are most suitable to the niche markets where we are focusing our strategic efforts. These vessels, which are more readily available in the charter market, offer the most optionality as they can serve a larger proportion of the world’s ports compared to mega vessels (greater than 15,000 TEUs) that exclusively cover mainlane trades. As of September 30, 2020, large mid-sized vessels (3,000 to 10,000 TEUs) comprised 57% of our fleet (or 64% in terms of TEU capacity). We are currently exploring long-term lease arrangements in respect of vessels planned to be deployed in the Transpacific trade, which would replace some vessels currently under short-term charters. The capacity of such new vessels could reach 15,000 TEUs, which would increase our ability to service such routes.

Enhanced geographic coverage and service offerings through partnerships including strategic cooperation agreement with the 2M Alliance.   In 2018, we entered into a strategic cooperation agreement with the 2M Alliance to improve coverage and cost efficiencies in select strategic trades. The 2M Alliance members, Maersk and MSC, control 33% of the global fleet by TEU capacity as of September 30, 2020 and our arrangement with the 2M Alliance provides for comprehensive vessel sharing and port coverage. Our coverage with the 2M Alliance includes four trade routes and 11 services: (1) Asia — USEC (five services), (2) Asia — Pacific Northwest (two services), (3) Asia — Mediterranean (two services) and (4) Asia — U.S. Gulf (two services). Our cooperation agreement with the 2M Alliance allows us to “partner-to-play” at scale with greater stability in our trade routes that originate out of Asia by providing more competitive slot costs, new ports of call and superior transit times. In addition to the 2M Alliance, we partner with most of the top global carriers as well as regional carriers in local lanes through cooperation agreements and strive to select the best partner for each of the trades in which we operate. These cooperation agreements allow us to continue to operate with flexibility while enhancing our coverage, provide more frequent and efficient services within our select trades and help us respond to changes in industry and market dynamics more expeditiously than our competitors.

Commercial and operational excellence powered by our digital tools and innovation.   We have implemented numerous digital tools and smart systems to support our customer-centric approach and to maximize our profitability. We have invested heavily in technology platforms, incorporating direct feedback from our customers through our “Powered by our customers” approach, to help make doing business with ZIM easier. The following platforms and services are the product of our efforts and investment over the past three years: (i) with more than 400,000 unique visitors per month, our new company website is responsively designed for any device, supporting multiple languages, dynamic service maps, local news and updates and a new live chat feature; (ii) launched in January 2019, myZIM Customer Personal Area provides our customers with a more efficient and convenient way to manage all their shipments under one digital platform; (iii) online access to all customers’ documentation, including booking confirmation, bill of ladings, delivery orders, freight invoices, arrival notices, etc.; (iv) print B/L, a feature that allows our customers to independently print their original bill of lading at their location; (v) online technical chat support; (vi) draft B/L, which enables export users to view, edit and approve their bill of landing draft online without the need to call a representative; (vii) eZIM, the fastest and easiest way to directly submit eBooking and eShipping Instructions, as well as eZQuote, which adds the ability for all customers to receive instant quotes with a fixed price and guaranteed terms, and (viii) ZIMapp, a complementary digital gateway service that allows easy access to both ZIM.com and myZIM, anywhere and anytime. In addition to our front-end customer-focused digital platforms, we have invested in internal tools to improve revenue management and profitability. Our internal tools include: (i) “Lead-to-Agreement”, a system that
 
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manages all of our commercial agreements and streamlines communications between our geographic trade zones, sales force and customers; (ii) “Commercial Excellence”, an advanced cloud-based analytical tool that assists our geographic trade zones and sales force in focusing on more profitable customers in specific trades; (iii) “Hive”, a yield management platform which enables instant cargo selection and booking acceptance based on defined business rules, while providing geographic trade zones with live view and interactive control over forecasts, booking acceptances and equipment releases, maximizing the profitability of each voyage and improving response time to our customers; (iv) “ZIMPulse”, a comprehensive set of on-line KPIs, broken down by geographic trade zone and country, with “push” notifications for anomalies in data; (v) “ZIMGuard,” an artificial intelligence- based system designed to detect possible misdeclarations of dangerous cargo in real time, increasing supply chain safety; and (vi) “Logistics Fraud Detection”, machine learning-based analysis that identifies anomalies in logistics container movement and assists with fraud prevention.

Customer-centric service offering supporting a diverse and loyal global customer base.   As of September 30, 2020, we had approximately 26,800 customers (which considers each of our customer entities separately, even if it is a subsidiary or branch of another customer) from 84 countries. Our customers include blue chip beneficial cargo owners such as Target, Walmart and Electrolux as well as freight forwarders such as Kuehne + Nagel, DB Schenker, DHL and DSV Ocean Transport. For the 12 months ended on September 30, 2020, 35% of our volume was carried on behalf of beneficial cargo owners and 65% of our volume was carried on behalf of freight forwarders. In 2019, our 10 largest customers represented approximately 15% of our freight revenues and our 50 largest customers represented approximately 32% of our freight revenues, with no single customer representing more than 5% of our revenues. Although the container liner industry generally has low costs related to switching carriers, we have high retention rates among our largest customers. 75% of our top 20 customers in 2019 have been doing business with us for more than 10 years. Our enhanced focus on customer-centric services has driven improvement and stability in customer satisfaction over the past several years. We believe we are well-positioned to attract new customers by being the leading carrier of choice in the trades in which we operate, through our reliable and competitive services, via our broad range of premium shipping solutions, our best-in-class technology and our highly trained and experienced sales force and customer service representatives.

Strong performance culture and experienced management team with deep industry knowledge.   As a pioneer in providing seaborne transportation and logistics solutions since 1945, we have developed a strong company culture for performance, where individual and collective behavior supports the execution of our strategies, led by a management team with vast business experience and deep industry knowledge and with the full support and guidance of an extremely experienced Board of Directors. In 2019, we launched a new Vision and Values within our organization, which defined our values as: (1) can-do approach, (2) results-driven, (3) agility, (4) togetherness and (5) sustainability, while our Vision is defined as “Innovative shipping dedicated to you!”. The refreshed new Vision and Values were fully implemented across the organization and we believe have been instrumental in helping improve the spirit of the organization and support our financial results. Relative to our global liner peers, we have improved to the #1 ranking in terms of employee satisfaction according to Glassdoor. On average, our senior managers have been with us for approximately 12 years and have an average of 16 years of experience in a variety of roles within the shipping industry. In addition, our Board of Directors is comprised of seasoned business managers with diverse backgrounds and includes a number of highly experienced shipping veterans with multi-decade experience across all segments of the sector, including operations, ownership, management and ship finance. We believe that our team’s experience, deep industry knowledge and strong relationships with container liner industry participants, including freight forwarders, financing providers, customers, rail and truck transportation providers, vessel owners and shipbuilders, will continue to position us to execute our growth strategies. Our senior management team has a proven ability to lead complex processes and achieve desired results. This is demonstrated through our ability to achieve industry-leading Adjusted EBIT margins for the last 23 consecutive quarters.
 
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Our strategies
Our primary objective is to use our strengths to profitably grow our business and maximize value to our shareholders. The key elements of our strategy are:

Further develop our industry-leading technologies to drive profitability.   We continue to focus on developing industry-leading and best-in-class technologies to support our customers, improve our operations and maximize our profitability. We are focused on developing the best end-to-end digital experience for our customers while maintaining our personal touch. Digital services such as (i) ZIMonitor, which is an advanced tracking device that provides 24/7 online alerts to support high value cargo, (ii) eZIM, our easy-to-use online booking platform and (iii) eZQuote, our online instant quoting service, all enable us to attract and retain high quality customers. Further, our continued investment in our back-end revenue management tools enables us to proactively manage our cargo and vessels to focus on the highest yielding bookings with our customers. For example, the “Dynamic Pricing” tool that we are developing will assist us in improving our profitability margins through use of an analytical engine to identify the optimal pricing for spot transactions. We believe that the core pillar of our growth and profitability strategy is our recent and continued investment in industry-leading and differentiated technologies.

Strategically expand our presence in existing geographic trades and enter new targeted, profitable trades.   Our strategy is to be a leading carrier of choice in each of the geographic trades in which we operate and markets we serve. We focus on trades that we believe are underserved and where we can introduce competitive and comprehensive product offerings to drive our profitability. We will continue to look for opportunities to launch new growth engines such as the ZIM eCommerce Xpress (“ZEX”) line and the ZIM China Australia Express (“CAX”) line in response to growing eCommerce trends. Our CAX service is an additional agile response to meeting market demand, connecting Australia with its largest trading partner whilst offering a competitive transit time. As a further example, in response to Vietnam’s rise as the fastest growing export country in Asia, we have recently extended our services connecting Vietnam to the Intra-Asia trade and for feeding into the Transpacific market. We now offer coverage to Vietnam ports across nine Intra-Asia lines and one direct Transpacific route.

Leverage our strategic cooperation agreements, including with the 2M Alliance, to drive further growth in strategic trades.   Our flexibility to partner with many of the top global carriers on global trades and with select regional carriers on local trades provides us with the ability to choose the best partner for each of our trades. These partnerships are a core principle of our growth strategy. Our long-term strategic cooperation with the 2M Alliance is focused on improving coverage and cost efficiencies across several of our most critical trade lanes that originate out of Asia into the United States and Mediterranean. This partnership allows us to compete at scale with the larger global liners in these markets. Our cooperation agreements include joint growth mechanisms such as upsizing vessel size, launching additional lanes in a given trade and deploying and sharing additional ad-hoc sailings to meet peak demand. Cooperation agreements drive more cost-efficient volume growth and coverage with reduced risk either by rationalizing slots or upsizing vessels jointly.

Continue relentless focus on cost management initiatives.   The constant focus on operational improvements is a key element of our corporate culture. We intend to continue to focus on improving processes and structures across the organization to drive efficiencies and cost savings while maintaining a high level of service. We expect that the global procurement function will continue to generate savings from both new and renegotiated supplier contracts via decreasing contract rates. We have improved our operations through several creative initiatives such as innovative fuel procurement, consumption optimization and port performance optimization and we continuously evaluate the market and seek to develop new initiatives. We also intend to continue to improve and invest in our information technology infrastructure to support further business analytics initiatives, including logistics analyses, operational efficiencies and cost reduction opportunities.

Focus on sustainability as a core principle of our service offering.   Through our core value of sustainability, we aim to uphold and advance a set of principles regarding Ethical, Social and Environmental concerns. Our goal is to work resolutely to eliminate corruption risks, promote diversity among our teams and continuously reduce the environmental impact of our operations,
 
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both at sea and onshore. In March 2020, our Board of Directors approved the adoption of a comprehensive anti-corruption and anti-bribery enforcement plan. Since 2018, we have also participated as a member of the Maritime Anti-Corruption Network, a global business network working towards the vision of a maritime industry free of corruption that enables fair trade. To further drive home our efforts around sustainability, we have joined a number of associations that are dedicated to reducing environmental impacts in the container shipping industry, such as the World Ports Climate Initiative and the Clean Cargo Working Group, and we have created our own Sustainability Working Group, which actively promotes initiatives with positive environmental impacts. One of our main goals has been the prevention of pollutions and reduction of CO2 emissions and from 2018 to 2019, we reduced our CO2 emissions by over 25%. In addition to reducing pollution and emissions, we are highly focused on monitoring our fuel consumption. We have been able to improve our fuel efficiency (fuel consumption per 1,000 miles per TEU) since 2016 by over 11% through our enhanced port call sequence, improved port productivity and optimized sea routes to avoid extreme weather. As we continue to grow, sustainability will remain as a core value.

Further opportunities for investment in new engines of growth.   Recently, we have developed, and will continue to develop multiple engines of growth which are adjacent to our traditional container shipping business. We have formed a number of partnerships and collaborations with third-party start-ups, as innovation is in our DNA. These technological partnerships and initiatives include: (i) “ZKCyberStar”, a collaboration with Konfidas, a leading cyber-security consulting company, to provide bespoke cyber-security solutions, guidance, methodology and training to the maritime industry; (ii) “ZCode”, a new initiative in cooperation with Sodyo, an early stage scanning technology company, aimed to provide visual identification solutions for the entire logistics sector (inventory management, asset tracking, fleet management, shipping, access control, etc.). This technology is extremely fast and is suitable for multiple types of media; (iii) Our investment in and partnership with WAVE, a leading electronic B/L based on blockchain technology, to replace and secure original documents of title; (iv) Our investment in and partnership with Ladingo, a one-stop-shop for Cross Border Shipments with all-in-one, easy to use software and fully integrated service, making it easier, more affordable and risk free to import and export LCLs, FCLs or any large and bulky shipments. This partnership is set to complement our cooperation with Alibaba, by adding an online LCL solution for Alibaba sellers, and is expected to enable us to gain footprint in adjacent and new markets, grow our revenue streams and provide added value to our customers.
Recent developments
Preliminary estimated unaudited financial and operating results as of and for the fiscal year ended December 31, 2020
The data presented below reflects certain preliminary estimated unaudited financial and operating results as of and for the year ended December 31, 2020, based upon information available to us as of the date of this prospectus. We have provided estimated ranges, rather than specific amounts, because these results are preliminary and subject to change. This data is not a comprehensive statement of our financial or operating results as of and for the year ended December 31, 2020, and our actual results may differ materially from this preliminary estimated data.
We have not yet completed closing our accounting records for the year ended December 31, 2020, and the audit of our financial statements for such period has not been completed. During the course of our financial close, the preparation of our financial statements and related notes and the completion of the audit for the year ended December 31, 2020, additional adjustments to the preliminary estimated financial information presented below may be necessary, including to present the information in accordance with IFRS. Any such adjustments may be material. Therefore, this data represents management estimates that are subject to risks and uncertainties. See “Special note regarding forward-looking statements” and “Risk factors.”
Accordingly, actual results may differ materially from these estimates, and all of these preliminary estimates are subject to change. The preliminary estimates included in this prospectus have been prepared by, and are the responsibility of, management. Our independent registered public accounting firm, Somekh
 
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Chaikin, a member firm of KPMG International, has not audited, reviewed, compiled or performed any procedures with respect to this preliminary data and, accordingly, Somekh Chaikin does not express an opinion or any other form of assurance with respect thereto.
Based upon such preliminary estimated and operating financial results, we expect the following key metrics as of and for the year ended December 31, 2020 to be between the ranges set out in the following table, as compared to the year ended December 31, 2019.
As of and for the Year Ended
December 31, 2020
As of and for the
Year Ended
December 31, 2019(4)
(estimated)
Low
High
(in millions, except TEUs carried and
average freight rate per TEU)
Income from voyages and related services
$ 3,957 $ 4,037 $ 3,300
Net income (loss)
$ 500 $ 525 $ (13)
Adjusted EBIT(1)
$ 703 $ 733 $ 149
Adjusted EBITDA(1)
$ 1,002 $ 1,042 $ 386
TEUs carried (in thousands)
2,825 2,855 2,821
Average freight rate per TEU(2)
$ 1,222 $ 1,234 $ 1,009
Cash and cash equivalents(3)
$ 560 $ 580 $ 183
Total outstanding debt (face value)(3)
$ 1,847 $ 1,912 $ 1,611
(1)
Adjusted EBIT and Adjusted EBITDA are non-IFRS measures. See “— Non-IFRS financial measures” for how we define and calculate Adjusted EBIT and Adjusted EBITDA and a discussion about the limitations of these non-IFRS financial measures. The following tables reconcile these non-IFRS financial measures to net income (loss), the most directly comparable IFRS measure, for the periods presented:
Year Ended
December 31, 2020
Year Ended
December 31, 2019(4)
(estimated)
Low
High
(in millions)
Net income (loss)
$ 500 $ 525 $ (13)
Financial expenses (income), net
181 182 154
Income taxes
16 18 12
Operating income (EBIT)
697 725 153
Non-cash charter hire expenses
7 8 11
Capital loss (gain), beyond the ordinary course of business
(14)
Assets impairment loss (recovery)
(4) (4) 1
Expenses related to legal contingencies
3 4 (2)
Adjusted EBIT
$ 703 $ 733 $ 149
 
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Year Ended
December 31, 2020
Year Ended
December 31, 2019(4)
(estimated)
Low
High
(in millions)
Net income (loss)
$ 500 $ 525 $ (13)
Financial expenses (income), net
181 182 154
Income taxes
16 18 12
Depreciation and amortization
305 316 246
EBITDA
1,002 1,041 399
Non-cash charter hire expenses
1 1 2
Capital loss (gain), beyond the ordinary course of business
(14)
Assets impairment loss (recovery)
(4) (4) 1
Expenses related to legal contingencies
3 4 (2)
Adjusted EBITDA
$ 1,002 $ 1,042 $ 386
(2)
We define average freight rate per TEU as revenues from containerized cargo during each period divided by the number of TEUs carried for that same period. The following table provides revenues from containerized cargo for the periods presented:
Year Ended
December 31, 2020
Year Ended
December 31, 2019(4)
(estimated)
Low
High
(in millions)
Freight revenues from containerized cargo
$ 3,452 $ 3,523 $ 2,847
(3)
As a result of improved operating cash flows, we expect to make approximately $85 million of mandatory early repayments of our Series 1 notes during March 2021 in accordance with the excess cash provisions set forth therein, and we may be required to make additional mandatory early repayments due to such provisions during the course of 2021 (see also “Management's discussion and analysis of financial condition and results of operations — Liquidity and capital resources — Debt and other financing arrangements”). These repayments will result in a corresponding decrease in both our total outstanding debt and our cash and cash equivalents.
(4)
Amounts presented are rounded to the nearest millionth dollar, thousandth dollar or dollar, as applicable, and may not sum due to rounding.
We expect income from voyages and related services for the year ended December 31, 2020 to increase by between 20% and 22%, from $3,300 million for the year ended December 31, 2019, primarily due to an increase in revenues from containerized cargo.
The number of TEUs carried for the year ended December 31, 2020 is expected to increase by between 4 thousand and 34 thousand TEUs, from 2,821 thousand TEUs for the year ended December 31, 2019. This reflects a strong recovery in the second half of fiscal year 2020, following the volume drop experienced in the first half of the year as a result of the COVID-19 pandemic implications. The average freight rate per TEU carried for the year ended December 31, 2020 is expected to increase by between $213 and $225, or 21% and 22%, from $1,009 for the year ended December 31, 2019.
We expect net income (loss) for the year ended December 31, 2020 to increase by between $513 million and $538 million, from a loss of $13 million for the year ended December 31, 2019, primarily driven by an increase in revenues from containerized cargo, partially offset by an increase in depreciation expenses (mainly related to right-of-use assets).
These estimated preliminary results and operating metrics should be read in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and our historical
 
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consolidated financial statements and the notes thereto. For further discussion of factors that impact our results of operations, see “Management’s discussion and analysis of financial condition and results of operations — Factors affecting our results of operations.”
Fleet expansion
In an effort to respond to increased demand for container shipping services globally, between October 1, 2020 and January 19, 2021, we chartered in an additional 26 vessels (net, including vessels pending delivery). We deployed nine of these vessels in our two recently launched premium high speed services to Australia in the Intra-Asia trade zone, including CAX which carries cargo from China and C2A which carries cargo from Thailand, Vietnam and South China. Of the remaining vessels, we deployed three vessels in the Intra Mediterranean & Black Sea sub-trade in the Atlantic-Europe trade zone, two vessels in the Caribbean and Intra Americas services, one vessel in the specific cars and trucks carrier line, an additional seven vessels in the Intra-Asia trade zone and four vessels in the Transpacific trade zone.
As of January 19, 2021, our fleet included 96 vessels (93 cargo vessels and three vehicle transport vessels), of which one vessel is owned by us and 95 vessels are chartered-in (including four vessels accounted under sale and leaseback refinancing agreements), and had a capacity of 406,502 TEUs. Further, as of January 19, 2021, 60% of our chartered-in vessels are under short-term leases with a remaining charter duration of less than one year, as we continue to actively manage our asset mix.
Pre-IPO share split
We will amend and restate our articles of association in connection with this offering, which will reflect a pro rata distribution to our shareholders of nine ordinary shares for each one ordinary share issued and outstanding, which distribution will become effective immediately following pricing and prior to the issuance of shares in this offering. This planned pro rata distribution, or the Pre-IPO Share Split, will result in 100,000,000 ordinary shares being outstanding immediately after pricing and prior to the issuance of shares in this offering. See “— The offering” and “Shares eligible for future sale” for more information.
Corporate information
We are incorporated under the laws of the State of Israel (registration number 52-001504-1). Our principal executive offices are located at 9 Andrei Sakharov Street, P.O. Box 15067, Matam, Haifa 3190500, Israel, and our telephone number is +972 (4) 865-2000. Our website address is www.zim.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. We have included our website address in this prospectus solely for informational purposes.
 
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THE OFFERING
Ordinary shares offered
14,500,000 ordinary shares
Ordinary shares outstanding before this offering
100,000,000 ordinary shares
Ordinary shares to be outstanding after this offering
114,500,000 ordinary shares (or 116,675,000 ordinary shares if the underwriters exercise their option to purchase additional ordinary shares in full)
Underwriters’ option
We have granted the underwriters an option for a period of 30 days after the date of this prospectus to purchase up to an additional 2,175,000 ordinary shares at the initial public offering price less the underwriting discount.
Use of proceeds
We intend to use the net proceeds from this offering to support long-term growth initiatives, including investing in vessels, containers and other digital initiatives, to strengthen our capital structure, to foster financial flexibility and for general corporate purposes. See “Use of proceeds.”
Dividends
Our Board of Directors has adopted a dividend policy, which will be in effect following this offering, to distribute each year up to 50% of our annual net income as determined under IFRS, provided that such distribution would not be detrimental to our cash needs or to any plans approved by our Board of Directors. Declaration and payment of any dividend is subject to the discretion of our Board of Directors and the requirements of Israeli law as well as the other limitations set forth in the sections of this prospectus entitled “Dividend policy,” “Risk factors” and “Description of share capital.”
Risk factors
See “Risk factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.
Listing
We have been approved to list our ordinary shares listed on the NYSE under the symbol “ZIM.”
The number of ordinary shares to be outstanding before and after this offering is based on 10,000,000 ordinary shares outstanding as of September 30, 2020 (which is the actual number of ordinary shares outstanding as of such date), after giving effect to the Pre-IPO Share Split (which would have resulted in 100,000,000 ordinary shares being outstanding as of such date).
The number of ordinary shares to be outstanding after this offering excludes:

4,990,000 ordinary shares reserved for issuance under our Option Plan (as defined below) as of September 30, 2020, of which options to purchase 4,990,000 shares at a weighted average exercise price of $1.00 per share were outstanding, in each case, after giving effect to the Pre-IPO Share Split; and

1,000,000 ordinary shares reserved for issuance under our Incentive Plan (as defined below), after giving effect to the Pre-IPO Share Split. Following the recommendation of our compensation committee and the approval of our audit committee, our Board of Directors approved the grant of options exercisable for our ordinary shares, subject to and on or about the closing of this offering, to a senior member of the Company’s management, with an aggregate fair market value (using a Black-Scholes valuation) equivalent to NIS 9.6 million to be translated into USD at the exchange rate in effect on the grant date. Such options shall be granted under our Incentive Plan, at an exercise price
 
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per share equal to the public offering price in this offering and exercisable for a term of five years from the grant date, subject to vesting. 25% of the options shall vest upon the first anniversary of the grant date with the remaining options vesting in equal quarterly installments over the following three-year period. The options shall be granted under the capital gains track through a trustee, under Section 102 of the Israeli Income Tax Ordinance (New Version), 1961. Based on an assumed exchange rate as of the grant date and the public offering price of $15.00 per share, such options would be exercisable for approximately 545,766 ordinary shares.
Unless otherwise indicated, this prospectus:

assumes no exercise of the underwriters’ option to purchase up to an additional 2,175,000 ordinary shares from us; and

does not give effect to the Pre-IPO Share Split, which contemplates the planned pro rata distribution to our shareholders of nine ordinary shares for each one ordinary share issued and outstanding, which distribution will become effective immediately following pricing and prior to the issuance of shares in this offering.
 
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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The summary consolidated financial data set forth below as of December 31, 2019 and for each of the years in the three year period ended December 31, 2019 have been derived from our audited consolidated financial statements and the notes thereto included elsewhere in this prospectus. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, and audited in accordance with the standards of the Public Company Accounting Oversight Board, or PCAOB. The summary consolidated financial data set forth below as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019 have been derived from the unaudited interim consolidated financial statements and the notes thereto included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future and our results of operations for any interim period are not necessarily indicative of the results of operations that may be expected for a full fiscal year or any other interim period.
This information should be read together with, and is qualified in its entirety by, our consolidated financial statements and the notes thereto. You should read the following summary consolidated financial and other data in conjunction with “Selected consolidated financial and other data,” “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and the notes thereto.
Nine Months Ended
September 30,
Year Ended December 31,
2020(1)
2019(1)
2019(1)
2018
2017
(in millions, except for share and per share data)
CONSOLIDATED INCOME STATEMENTS
Income from voyages and related services
$ 2,630.9 $ 2,472.5 $ 3,299.8 $ 3,247.9 $ 2,978.3
Cost of voyages and related services:
Operating expenses and cost of services
(2,039.0) (2,125.2) (2,810.8) (2,999.6) (2,600.1)
Depreciation
(204.3) (161.3) (226.0) (100.2) (97.2)
Gross profit
387.6 186.0 263.0 148.1 281.0
Other operating income (expenses), net
7.4 30.3 36.9 (32.8) 1.6
General and administrative expenses
(114.8) (111.5) (151.6) (143.9) (147.6)
Share of profits of associates
2.4 3.6 4.7 5.4 7.6
Results from operating activities
282.6 108.4 153.0 (23.2) 142.6
Finance expenses, net
(113.6) (112.5) (154.3) (82.6) (117.0)
Profit (loss) before income tax
169.0 (4.1) (1.3) (105.8) 25.6
Income tax
(11.2) (10.1) (11.7) (14.1) (14.2)
Net income (loss)
$ 157.8 $ (14.2) $ (13.0) $ (119.9) $ 11.4
Basic net income (loss) per ordinary share(2)
$ 15.29 $ (1.77) $ (1.81) $ (12.57) $ 0.62
Weighted average number of ordinary shares
used in computing basic net income (loss)
per ordinary share(2)
10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
Diluted net income (loss) per ordinary share(2)
$ 14.66 $ (1.77) $ (1.81) $ (12.57) $ 0.62
Weighted average number of ordinary shares
used in computing diluted net income
(loss) per ordinary share(2)
10,431,079 10,000,000 10,000,000 10,000,000 10,000,000
Pro forma basic net income (loss) per ordinary share(2)(3)
$ 1.53 $ (0.18) $ (0.18) $ (1.26) $ 0.06
Weighted average number of ordinary shares
used in computing pro forma basic net
income (loss) per ordinary share(2)(3)
100,000,000 100,000,000 100,000,000 100,000,000 100,000,000
Pro forma diluted net income (loss) per ordinary share(2)(3)
$ 1.47 $ (0.18) $ (0.18) $ (1.26) $ 0.06
Weighted average number of ordinary shares
used in computing pro forma diluted net
income (loss) per ordinary share(2)(3)
104,310,786 100,000,000 100,000,000 100,000,000 100,000,000
 
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As of September 30, 2020
As of December 31, 2019
Actual
As Adjusted(4)
Actual
(in millions)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DATA
Total current assets
$ 823.4 $ 1,020.4 $ 630.8
Total assets
2,197.2 $ 2,394.1 1,926.1
Total current liabilities
975.9 $ 975.9 926.3
Total liabilities
2,292.3 $ 2,292.3 2,178.4
Total non-current liabilities
1,316.4 $ 1,316.3 1,252.0
Total shareholders’ equity (deficit)
(95.1) $ 101.8 (252.3)
Nine Months Ended
September 30,
Year Ended December 31,
2020(1)
2019(1)
2019(1)
2018
2017
(in millions)
CONSOLIDATED CASH FLOW DATA
Net cash generated from operating activities
$ 466.4 $ 281.3 $ 370.6 $ 225.0 $ 230.9
Net cash generated from (used in) investing activities
(13.0) 44.7 38.0 51.1 (93.5)
Net cash used in financing activities
(286.1) (326.2) (411.4) (242.7) (139.8)
Nine Months Ended
September 30,
Year Ended December 31,
2020(1)
2019(1)
2019(1)
2018
2017
(in millions)
OTHER FINANCIAL DATA
Adjusted EBIT(5)
$ 289.4 $ 101.5 $ 148.9 $ 39.1 $ 169.3
Adjusted EBITDA(5)
504.5 270.5 385.9 150.7 277.6
Nine Months Ended
September 30,
Year Ended December 31,
2020(1)
2019(1)
2019(1)
2018
2017
OTHER SUPPLEMENTAL DATA
TEUs carried (in thousands)
2,042 2,124 2,821 2,914 2,629
Average freight rate per TEU(6)
$ 1,116 $ 1,007 $ 1,009 $ 973 $ 995
*
Other Financial Data and Other Supplemental Data have not been derived from our consolidated financial statements.
(1)
On January 1, 2019, the Company initially applied the new accounting guidance for leases in accordance with IFRS 16. See “Management’s discussion and analysis of financial condition and results of operations — Factors affecting comparability of financial position and results of operations — Adoption of IFRS 16” and Note 2(e) to our audited consolidated financial statements included elsewhere in this prospectus.
(2)
Basic and diluted net income (loss) per ordinary share are computed based on the weighted average number of ordinary shares outstanding during each period. For additional information, see Note 11 to our audited consolidated financial statements included elsewhere in this prospectus.
(3)
Pro forma basic and diluted net income (loss) per ordinary share give effect to the Pre-IPO Share Split for all periods presented.
 
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(4)
As adjusted gives effect to the issuance and sale of ordinary shares by us in this offering at the initial public offering price of $15.00 per share and our expected use of proceeds therefrom, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. See “Use of proceeds” and “Capitalization.”
(5)
Adjusted EBIT and Adjusted EBITDA are non-IFRS measures. See “— Non-IFRS financial measures” below for how we define and calculate Adjusted EBIT and Adjusted EBITDA, a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS measures, and a discussion about the limitations of these non-IFRS financial measures.
(6)
We define average freight rate per TEU as revenues from containerized cargo during each period divided by the number of TEUs carried for that same period. The following table provides revenues from containerized cargo for the periods presented:
Nine Months Ended
September 30,
Year Ended December 31,
2020
2019
2019
2018
2017
(in millions)
Freight revenues from containerized cargo
$ 2,279.4 $ 2,137.9 $ 2,847.3 $ 2,835.8 $ 2,617.2
NON-IFRS FINANCIAL MEASURES
Adjusted EBIT
Adjusted EBIT is a non-IFRS financial measure that we define as net income (loss) adjusted to exclude financial expenses (income), net and income taxes in order to reach our results from operating activities, or EBIT, and further adjusted to exclude impairment of assets, non-cash charter hire expenses, capital gains (losses) beyond the ordinary course of business and expenses related to legal contingencies. We have included Adjusted EBIT in this prospectus because it is a key measure used by our management and Board of Directors to evaluate our operating performance. We believe that it is also a useful measure for investors and analysts to measure our operating performance and to compare our operating results between periods on a consistent basis and, because Adjusted EBIT is a common measure of performance in our industry, to compare our operating results to the operating results of our peers. Nevertheless, Adjusted EBIT may not be comparable to similarly titled measures of other companies because other entities may not define or calculate Adjusted EBIT in the same manner. In arriving at this non-IFRS financial measure, we have excluded items that either have a non-recurring impact on our income statements or which, in the judgment of our management, are excluded to facilitate operating performance comparisons. Accordingly, we believe that Adjusted EBIT provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors. Nevertheless, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for net income (loss) or any other financial measure reported in accordance with IFRS.
This non-IFRS financial measure has certain limitations as it does not include items which may have a material effect on our financial statements. Some of these limitations are:

Adjusted EBIT does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted EBIT does not reflect tax payments that may represent a reduction in cash available to us; and

Adjusted EBIT does not reflect interest and debt repayments to which we are subject or debt receipts.
Accordingly, management uses Adjusted EBIT as only one of several measures for evaluating our business performance. In addition, financial expenses (income), net, income taxes, non-cash charter hire expenses, impairments and capital gains (losses) beyond the ordinary course of business, as well as expenses related to legal contingencies are reviewed separately by management.
 
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The following table reconciles net income (loss), the most directly comparable IFRS measure, to Adjusted EBIT for the periods presented:
Nine Months Ended
September 30,
Year Ended December 31,
2020
2019
2019
2018
2017
(in millions)
RECONCILIATION OF NET INCOME (LOSS)
TO ADJUSTED EBIT
Net income (loss)
$ 157.8 $ (14.2) $ (13.0) $ (119.9) $ 11.4
Financial expenses (income), net
113.6 112.5 154.3 82.6 117.0
Income taxes
11.2 10.1 11.7 14.1 14.2
Operating income (EBIT)
282.6 108.4 153.0 (23.2) 142.6
Non-cash charter hire expenses(1)
6.3 8.1 10.5 20.0 21.8
Capital loss (gain), beyond the ordinary course of
business(2)
(14.6) (14.2) (0.3) 0.2
Impairment of assets
0.5 1.2 1.2 37.9 2.5
Expenses related to legal contingencies
(1.6) (1.6) 4.7 2.2
Adjusted EBIT
$ 289.4 $ 101.5 $ 148.9 $ 39.1 $ 169.3
Adjusted EBIT margin(3)
11.0% 4.1% 4.5% 1.2% 5.7%
(1)
Mainly related to amortization of deferred charter hire costs, recorded in connection with the debt restructuring we undertook in 2014 (the “2014 restructuring”).
(2)
Related to disposal of assets, other than containers and equipment (which are disposed on a recurring basis).
(3)
Represents Adjusted EBIT divided by Income from voyages and related services.
Adjusted EBITDA
We also examine Adjusted EBITDA as an additional financial measurement. Adjusted EBITDA is a non-IFRS financial measure that we define as net income (loss) adjusted to exclude financial expenses (income), net, income taxes, depreciation and amortization in order to reach EBITDA, and further adjusted to exclude impairment of assets, non-cash charter hire expenses, capital gains (losses) beyond the ordinary course of business and expenses related to legal contingencies. We have included Adjusted EBITDA in this prospectus because it is a key measure used by our management and Board of Directors to evaluate our operating performance. It is also a useful measure for investors and analysts to measure our operating performance and to compare our operating results between periods on a consistent basis. Nevertheless, Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other entities may not define or calculate Adjusted EBITDA in the same manner.
Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income (loss) as it does not take into account certain requirements such as capital expenditures and related depreciation, principal and interest payments, and tax payments. Additionally, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under IFRS. Some of these limitations are:

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and

Adjusted EBITDA does not reflect interest and debt repayments to which we are subject or debt receipts.
 
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Management compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating our business performance. In addition, depreciation and amortization, impairments, financial expenses (income), net, income taxes, non-cash charter hire expenses and capital gains (losses) beyond the ordinary course of business, as well as expenses related to legal contingencies are reviewed separately by management.
The following table reconciles net income (loss), the most directly comparable IFRS measure, to Adjusted EBITDA for the periods presented:
Nine Months Ended
September 30,
Year Ended December 31,
2020(1)
2019(1)
2019(1)
2018
2017
(in millions)
RECONCILIATION OF NET INCOME (LOSS)
TO ADJUSTED EBITDA
Net income (loss)
$ 157.8 $ (14.2) $ (13.0) $ (119.9) $ 11.4
Financial expenses (income), net
113.6 112.5 154.3 82.6 117.0
Income taxes
11.2 10.1 11.7 14.1 14.2
Depreciation and amortization
220.8 175.4 245.5 111.6 108.3
EBITDA
503.4 283.8 398.5 88.4 250.9
Non-cash charter hire expenses(2)
0.6 1.7 2.0 20.0 21.8
Capital loss (gain), beyond the ordinary course of business(3)
(14.6) (14.2) (0.3) 0.2
Impairment of assets
0.5 1.2 1.2 37.9 2.5
Expenses related to legal contingencies
(1.6) (1.6) 4.7 2.2
Adjusted EBITDA
$ 504.5 $ 270.5 $ 385.9 $ 150.7 $ 277.6
(1)
On January 1, 2019, the Company initially applied the new accounting guidance for leases in accordance with IFRS 16. See “Management’s discussion and analysis of financial condition and results of operation — Factors affecting comparability of financial position and results of operations — Adoption of IFRS 16” and Note 2(e) to our audited consolidated financial statements included elsewhere in this prospectus.
(2)
Mainly related to amortization of deferred charter hire costs, recorded in connection with the 2014 restructuring. Following the adoption of IFRS 16 on January 1, 2019, part of the adjustments are recorded as amortization of right-of-use assets.
(3)
Related to disposal of assets, other than containers and equipment (which are disposed on a recurring basis).
We believe that these non-IFRS financial measures are useful in evaluating our business because they are leading indicators of our profitability and our overall business. Nevertheless, this information should be considered as supplemental in nature and not meant to be considered in isolation or as a substitute for net income (loss) or any other financial measure reported in accordance with IFRS. Other companies, including companies in our industry, may calculate Adjusted EBIT and Adjusted EBITDA differently or not at all, which reduces the usefulness of these measures as comparative measures. You should consider Adjusted EBIT and Adjusted EBITDA along with other financial performance measures, including net income (loss), and our financial results presented in accordance with IFRS.
 
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RISK FACTORS
This offering and an investment in our ordinary shares involve risks and uncertainties. You should consider carefully the risks described below and all other information contained in this prospectus, before you decide to invest in our ordinary shares. Additional risks and uncertainties of which we are not presently aware or currently deem immaterial could also affect our business, financial condition and results of operations. If any of these risks and uncertainties actually occurs, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of our ordinary shares would likely decline and you might lose all or part of your investment.
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.

The container shipping industry is dynamic and volatile and has been marked in recent years by instability and uncertainties as a result of global economic conditions and the many factors that affect supply and demand in the shipping industry, including geopolitical trends, US-China related trade restrictions, regulatory developments, relocation of manufacturing and, recently, the impact of the COVID-19 pandemic.

We charter-in substantially all 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.

Excess supply of global container ship capacity, which depresses freight rates, may limit our ability to operate our vessels profitably. In addition, increased global container ship capacities are leading to overload and/or overcapacity and congestion in certain ports and may limit our access to ports.

Changing trading patterns, trade flows and sharpening trade imbalances 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, which may adversely affect our business, and we face risks related to our strategic cooperation agreement with the 2M Alliance.

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.

Volatile bunker prices, including as a result of the mandatory transfer to low sulfur oil bunker by the IMO 2020 Regulations, may have an adverse effect on our results of operations.
Risks related to our business and our industry
We only 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 lack of diversification, an adverse development in the container shipping industry would have a significant impact on our financial condition and results of operations.
 
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The container shipping industry is dynamic and volatile and has been marked in recent years by instability as a result of global 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 the impact of the COVID-19 pandemic on the global economy, armed conflicts, terrorist activities, embargoes, strikes and trade wars;

the global supply of and demand for commodities and industrial products globally and in certain key markets, such as China;

developments in international trade, including the imposition of tariffs, the modification of trade agreements between states and other trade protectionism (for example, in the U.S.-China trade);

currency exchange rates;

prices of energy resources;

environmental and other regulatory developments;

changes in seaborne and other transportation patterns;

changes in the shipping industry, including mergers and acquisitions, bankruptcies, restructurings and alliances;

changes in the infrastructure and capabilities of ports and terminals;

weather conditions;

outbreaks of diseases, including the COVID-19 pandemic; and

development of digital platforms to manage operations and customer relations, including billing and services.
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, although freight rates have recovered during the fourth quarter of 2019, mainly driven by a recovery of the higher bunker cost associated with the implementation of IMO 2020 Regulations, the comprehensive Shanghai (Export) Containerized Freight Index which increased from 716 at October 17, 2019 to 1,023 points at January 3, 2020, thereafter decreased to 818 points at April 23, 2020 and increased again to 2,311 points at December 11, 2020. Furthermore, rates within the charter market, through which we source almost all of our capacity, may also fluctuate significantly based upon changes in supply and demand for shipping services. In addition, in 2014, in order to cope with the cyclicality in the industry and our leveraged financial position, we entered into a restructuring of our debt (which we refer to in this prospectus as the “2014 restructuring”). 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.
We charter-in substantially all of our fleet, with the majority of charters being less than a year, which makes us more sensitive to fluctuations in the charter market, and as a result of our dependency on the vessel charter market, the costs associated with chartering vessels are unpredictable.
We charter-in substantially all of the vessels in our fleet. As of September 30, 2020, of the 70 vessels through which we provide transport services globally, 69 are chartered (including 35 vessels accounted as right-of-use assets under the accounting guidance of IFRS 16 and four vessels accounted under sale and leaseback refinancing agreements), which represents a percentage of chartered vessels that is significantly higher than the industry average of 56% (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, charter demand is currently higher than expected, leading to an imbalance in supply and demand and a shortage of vessels available for hire. Although the terms of our Series 1 and 2 notes currently limit our ability to buy or charter large vessels for long periods of time, we are party to a number of long-term charter agreements, and may
 
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enter into additional long-term agreements based on our assessment of current and future market conditions and trends. See “Management’s discussion and analysis of financial condition and results of operations — liquidity and capital resources — Debt and other financing arrangements” for further detail on our Series 1 and 2 notes. As of September 30, 2020, 21.7% of our chartered-in vessels (or 28.8% in terms of TEU capacity) are chartered under leases for terms exceeding one year, and we are currently exploring long-term lease arrangements in respect of vessels planned to be deployed in the Transpacific trade, which means we may be unable to take full advantage of short-term reductions in charter hire rates. In addition, a substantial portion of our fleet is chartered-in for short-term periods of one year and less, 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, the principal amount of our long-term contractual obligations would increase. There can be no assurance that we will replace short-term leases with long-term leases or that the terms of any such long-term leases will be favorable to us. 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.
The global COVID-19 pandemic has created significant business disruptions and adversely affected our business and is likely to continue to create significant business disruptions and adversely affect our business in the future.
In March 2020, the World Health Organization declared the outbreak of novel coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, created significant volatility and disruption in financial markets and increased unemployment levels, all of which may become heightened concerns upon a second wave of infection or future developments. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities. In particular, the State of Israel where our head office is located has been highly affected by COVID-19, with a high and steady increase in percentage per capita of reported cases of infected patients. In March 2020, the Government of Israel imposed a mandatory quarantine of all foreign visitors and, in addition, announced that non-Israeli residents or citizens traveling from certain countries may be denied entry into Israel. Israel has further issued regulations imposing partial home confinement and other movement restrictions, reducing staffing of nonessential businesses, restricting public transportation and other public activities. In mid-September 2020, in light of an increase in percentage per capita of reported cases, the Government of Israel imposed an additional lockdown for a period of approximately three weeks, subject to certain exceptions. In December 2020, following a further increase in the percentage per capita of reported cases, the government of Israel imposed an additional lockdown for a period of two weeks, with the option of an additional extension thereafter, and subject to certain exceptions. Although we are considered an essential business and therefore enjoy certain exemptions from the restrictions under Israeli regulations, we have voluntary reduced our maximum permitted percentage of staffing in our offices in order to mitigate the COVID-19 risks and have therefore relied more on remote connectivity. We continue to monitor our operations and government regulations, guidelines and recommendations.
The COVID-19 pandemic has 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. For example, in January 2020, the government of China imposed a lockdown during the Chinese New Year holiday which prevented many workers from returning to the manufacturing facilities, resulting in prolonged reduction of manufacturing and export. Government-mandated shutdowns in various countries have also decreased consumption of goods, negatively affecting trade volumes and the shipping industry globally. Moreover, because our vessels travel to ports in countries in which cases of COVID-19 have been reported, we face risks to our personnel and operations. Such risks include delays in the loading and discharging of cargo on or from our vessels, difficulties in carrying out crew changes, offhire 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 and increased risk of cyber-security threats due to our employees working remotely. Fear of the virus and the efforts to prevent its spread continue to exert increasing 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
 
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of them. Such events have adversely affected and will likely continue to have a significant and adverse effect on our business, financial condition and results of operations. In addition, these and other impacts of the COVID-19 pandemic could have the effect of heightening many of the other risk factors disclosed in this prospectus.
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 business originates from China and therefore depends on the level of imports and exports to and from China. Trade tensions between the US and China have intensified in recent years, and trade restrictions have reduced bilateral trade between the US and China and led to shifts in trade structure and reductions in container trade. For more information on the risks related to US/China trade restrictions, see “— Our business may be adversely affected by trade protectionism.” Furthermore, as China exports considerably more goods than it imports, any reduction in or hindrance to China-based exports, whether due to 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 or other factors, could have a material adverse effect on our business. For instance, the Chinese government has recently 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. 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.
Excess supply of global container ship capacity may limit our ability to operate our vessels profitably.
Global container ship capacity has increased over the years and continues to exceed demand. As of December 31, 2019, global container ship capacity was approximately 23.2 million 20-foot equivalent units, or TEUs, spread across approximately 5,340 vessels. According to Alphaliner, excess capacity is projected to further increase, outpacing any expected increase in worldwide demand. Global container ship capacity is projected to increase by 2.6% in 2020, while demand for shipping services is projected to decrease by 2.3%. The COVID-19 pandemic outbreak has also caused a decrease in demand for goods, causing carriers to adopt mitigating measures such as blank sailings and redelivery of chartered vessels. However, there is no guarantee that these measures will prove successful, partially or at all. Additionally, 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. 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 continue to face oversupply in the coming years and numerous other factors beyond our control may also contribute to increased capacity, including deliveries of refurbished or converted vessels, port and canal congestion, decreased scrapping levels of older vessels, any decline 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, awaiting repairs or retrofitted scrubbers that meet the IMO’s 2020 low-sulfur fuel mandate or are otherwise not available for hire). Excess capacity depresses freight rates and can lead to lower utilization of vessels, which may adversely affect our revenues, profitability and asset values. Until such capacity is fully absorbed by the container shipping market and, in particular, the shipping lines on which our operations are focused, the industry will continue to experience downward pressure on freight rates and such prolonged pressure could have a material adverse effect on our financial condition, results of operations and liquidity.
 
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The increasing vessel size of containership newbuilding has exceeded the parallel development and adjustment of new and existing container terminals, which has led to higher utilization of vessels, near-full capacity at container terminals and congestion in certain ports. In addition, access to ports could be limited or unavailable for other reasons.
In recent years, the size of container ships has increased dramatically and at a faster rate than that to which container terminals are able to cater efficiently. 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 congestions, which could increase operational costs 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 and concerns and the interests of the container shipping industry may not be taken into account. In addition, 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. Furthermore, major ports may close for long periods of time due to maintenance, natural disasters, strikes or other reasons beyond our control (including the COVID-19 pandemic). We cannot ensure you 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.
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.
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 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. Rising tariff barriers and environmental concerns also accelerate these trends.
Our ability to participate in operational partnerships in the shipping industry is limited, which may adversely affect our business, and we face risks related to our strategic cooperation agreement with the 2M Alliance.
The container shipping industry has experienced a reduction in the number of major carriers, as well as a continuation and increase of the trends of strategic alliances and partnerships among container carriers,
 
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which can result in more efficient and better coverage for shipping companies participating in such arrangements. For example, in 2018, OOCL was acquired by COSCO and three large Japanese carriers, K-Line, MOL and NYK merged into ONE. In 2017, the merger of United Arab Shipping Company and Hapag-Lloyd, and the acquisition of Hamburg Sud by Maersk took place. Furthermore, in April 2020, Hyundai Merchant Marine (HMM) consummated the termination of its strategic cooperation with 2M and joined THE Alliance. The recent consolidation in the industry has affected the existing strategic alliances between shipping companies. For example, the Ocean Three alliance, which consisted of CMA CGM Shipping, United Arab Shipping Company and China Shipping Container Lines, was terminated in 2019 and replaced by the Ocean Alliance, consisting of COSCO Shipping, CMA CGM Shipping, Evergreen Marine and Orient Overseas Container Line.
We are not 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 party to operational partnerships with other carriers in some of the other trade zones in which we operate, and may seek to enter into additional operational partnerships or similar arrangements with other shipping companies or local operators, partners or agents. For example, in September 2018, we entered into a strategic operational cooperation agreement with the 2M Alliance in the Asia-USEC trade zone, which includes a joint network of five lines operated by us and by the 2M Alliance. In March 2019, we expanded our partnership with the 2M Alliance by entering into a second strategic cooperation agreement to cover the Asia-East Mediterranean and Asia-American Pacific Northwest trade zones, which includes two service lines, and in August 2019, we further expanded our partnership and launched two new US-Gulf Coast direct services with the 2M Alliance. For additional information on our strategic operational cooperation with the 2M Alliance, see “Business — Our operational partnerships.” Pursuant to our agreement with the 2M Alliance, commencing June 1, 2021, we and the 2M Alliance will discuss possible amendments to the agreement that would govern the next phase of our cooperation. If we fail to mutually agree on the terms for a continuation of the strategic operational cooperation, any party may terminate the agreement prior to December 1, 2021, and such termination would become effective on April 1, 2022. A termination of this or 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 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 the rest of the trade zones in which the 2M Alliance operates, as well as 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). If we are not successful in expanding or entering into additional operational partnerships which are beneficial to us, this could adversely affect our business. In addition, 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.
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, Maersk, MSC, COSCO Shipping, CMA CGM S.A., Hapag-Lloyd AG, ONE and Yang Ming Marine Transport Corporation 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 — A.P. Moller-Maersk Group, Mediterranean Shipping Company and COSCO — accounting for approximately 46% of global capacity, and the remaining carriers together contributing less than 54% of global capacity as of October 2020, 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 low freight rates for a sustained period of time. In addition, there has been an increase in mergers and acquisition activities within the container
 
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shipping industry in recent years, which has further concentrated global capacity with certain of our competitors. See “— Our ability to enter into strategic alliances and participate in operational partnerships in the shipping industry is limited, which may adversely affect our business, and we face risks related to our strategic cooperation agreement with the 2M Alliance.” 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. 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. 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 2019, our 10 largest customers represented approximately 15% of our freight revenues and our 50 largest customers represented approximately 32% of our freight revenues. Although we believe we currently have a diversified customer base, 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. Any inability to retain or replace our existing customers may have a material adverse effect on our business, financial condition and results of operations.
Rising bunker prices and the low-sulfur fuel mandate under the IMO 2020 Regulations may have an adverse effect on our results of operations.
Fuel expenses, in particular bunker expenses, represent a significant portion of our operating expenses, accounting for 10%, 12% and 17% of the income from voyages and related services for the nine months ended September 30, 2020 and the years ended December 31, 2019 and 2018, 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 economic developments in emerging markets such as China and India, the US-China trade war, concerns related to the global recession and financial turmoil, policies of the Organization of the Petroleum Exporting Countries (OPEC) and other oil producing countries and production cuts, sanctions on Iran by the US, 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 significantly in 2020, due in part to decreased demand as a result of the COVID-19 pandemic and the changing dynamics among OPEC+ members.
Effective January 1, 2020, the IMO imposed the IMO 2020 Regulations which 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%. Commencing January 1, 2020, ships are required to remove sulfur from emissions through the use of scrubbers or other emission control equipment, or purchase marine fuel with 0.5% sulfur content, which has led to increased demand for this type of fuel and higher prices for such bunker compared to the price we would have paid had the IMO 2020 Regulations not been adopted. Substantially all of the vessels chartered by us do not have scrubbers, which means we are required to purchase low sulfur fuel for our vessels. Our vessels began operating on 0.5% low sulfur fuel during the fourth quarter of 2019, and as a result, we 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. However, there is no assurance that this surcharge will enable us to mitigate the possible increased costs in full or at all. As a result of the IMO 2020 Regulations and any future regulations with which we must comply, we may incur substantial additional operating costs.
A rise in bunker prices 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
 
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time surcharges such as the NBF 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 polishing and sailing rout optimization. Additionally, we 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 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.
We may face difficulties in chartering or owning enough large vessels to support our growth strategy due to the possible shortage of vessel supply in the market.
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. As a result, cargo shippers are encouraged to deploy large vessels, particularly within the more competitive trades. According to Alphaliner, vessels in excess of 12,500 TEUs represented approximately 65% of the current global orderbook based on TEU capacity as of October 2020, and approximately 29% of the global fleet based on TEU capacity will consist of vessels in excess of 12,500 TEUs by the end of 2020. 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 lines 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. We do not currently have agreements in place to procure or charter-in large container vessels, 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. This risk is further exacerbated as a result of our inability to participate in certain alliances and thereby access lager 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.
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, 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 fuels and piracy. For example, we incurred expenses of $8.6 million in respect of claims and demands for lost and damaged cargo for the year ended December 31, 2019. 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. However, 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. Although both the frequency and success of attacks have diminished recently, potential acts of piracy continue to be a risk to the international container shipping industry that requires vigilance. Additionally, our vessels may be subject
 
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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.
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. 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.
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, collisions and contact with fixed and floating objects, (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, smuggling fines, third-party claims in excess of a vessel’s insured value arising from collisions with other vessels, damage to other third-party property 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. 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. Under the terms of our credit facilities, insurance proceeds are pledged in favor of the lender who financed the respective vessel. 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.
 
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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.
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 “Management’s discussion and analysis of financial condition and results of operations — Factors affecting comparability of financial position and results of operations — Seasonality.”
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. Currently, global demand for container shipping is highly volatile across regions and remains subject to downside risks stemming mainly from factors such as government-mandated shutdowns due to the COVID-19 pandemic, severe hits to the 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. These factors may negatively impact the demand for cargo and, as such, negatively impact the demand for container shipping. The deterioration in the global economy has caused, and may continue to cause, 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 additional significant deterioration in the global economy, such conditions could have a material adverse effect on our business, financial condition, results of operations and liquidity. Further, as a result of weak economic conditions, some of our customers and suppliers have experienced deterioration of their businesses, cash flow shortages and/or difficulty in obtaining financing. As a result, our existing or potential customers and suppliers may delay or cancel plans to purchase our services or may be unable to fulfill their obligations to us in a timely fashion. Geopolitical challenges such as trade wars, weather and natural disasters, political crises, embargoes and canal closures could also have a material adverse effect on our business, financial condition and results of operations.
Our business may be adversely affected by trade protectionism in the markets that we serve, particularly in China.
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, the length of time required to deliver goods and the risks associated with exporting goods as well as a decrease in the quantity of goods shipped. China’s import and export of goods may continue to be affected by trade protectionism, specifically the ongoing U.S.-China trade dispute, which has been characterized by escalating trade barriers between the U.S. and China as well as trade relations among other countries. These risks may have a direct impact on demand in the container shipping industry. While an agreement was reached between China and the U.S. in January 2020 aimed at easing the trade war, there can be no assurance that there will not be any further escalation.
 
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The U.S. administration has advocated greater restrictions on trade generally and significant increases on tariffs on certain goods imported into the United States, particularly from China and has taken steps toward restricting trade in certain goods. The U.S. has imposed significant amounts of tariffs on Chinese imports since 2018. China and other countries have retaliated in response to new trade policies, treaties and tariffs implemented by the United States. China has imposed significant tariffs on U.S. imports since 2018. 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 Asia Pacific, the length of time required to deliver goods from the region and the risks associated with exporting goods from the region. 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 returning from China 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. Meanwhile, the U.S. continues to threaten to introduce higher tariffs on EU imports. In addition, there is uncertainty regarding further trade barriers or restrictions on trade in the United States. 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.
Volatile market conditions could negatively affect our business, financial condition, 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 decline in freight rates or other 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 the recoverable amount and, if necessary, an impairment loss is recognized in our financial statements. The projection of future cash flows related to our operations, which is one CGU, is complex and requires us to make various estimates including future freight or charter rates, bunker prices, earnings from the vessels and discount rates, all of which have been volatile historically. For each of the years ended December 31, 2017, 2018 and 2019, we concluded that the recoverable amount of our CGU was higher than the carrying amount of our CGU and, as a result, did not recognize an impairment loss in our financial statements. However, we cannot assure you that we will not recognize 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.
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
 
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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, due to the COVID-19 pandemic, the shipping industry as a whole is experiencing difficulties in carrying out crew changes, which could impede our ability to employ qualified personnel.
Risks related to regulation
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 may result in a prepayment event under certain of our credit facilities, and could have a material adverse effect on our business, financial condition and results of operations.
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 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. 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.
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
 
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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. Any 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 “Regulatory matters.”
We are subject to competition and antitrust regulations in the countries where we operate, and have been subject to antitrust investigations by competition authorities.
We are subject to competition and antitrust regulations in each of the countries where we operate. In most 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. However, it is difficult to predict whether existing exemptions or their renewal will be affected in the future. In August 2020, our Board of Directors adopted a comprehensive new antitrust compliance plan, which included the adoption of a global policy as well as mandatory periodic employee trainings. 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. 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. 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 “Business — Legal Proceedings” and Note 27 to our audited consolidated financial statements included elsewhere in this prospectus.
Finally, Commission Regulation (EC) No 906/2009, or the Block Exemption Regulation, exempts certain cooperation agreements (such as operational cooperation agreements, VSA (vessel sharing agreements), SCA (slot chartering agreements) and slot swap agreements) in the liner shipping sector from the prohibition on anti-competitive agreements contained at Article 101 of the Treaty on the Functioning of the European Union, or TFEU. If the Block Exemption Regulation is not extended or its terms are amended, this could have an adverse effect on the shipping industry and limit our ability to enter into cooperation arrangements with other shipping companies, which could adversely affecting our business, financial condition and results of operations.
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 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
 
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and individuals. In March 2020, our Board of Directors approved the adoption of a comprehensive anti-bribery and anti-corruption plan, which establishes anti-bribery and anti-corruption policies and procedures, imposes mandatory training on our employees and enhances reporting and investigation procedures. Our policy and procedures mandate compliance with these anti-bribery laws. 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 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. Any such changes or developments 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.
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 (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.
 
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We may also incur additional compliance costs relating to existing or future requirements which could have a material adverse effect on our business, results of operations and financial conditions. Such costs include, among other things: reduction of greenhouse gas emissions; changes with respect to cargo capacity or the types of cargo that could be carried; management of ballast and bilge waters; maintenance and inspection; elimination of tin-based paint; and development and implementation of emergency procedures. For example, the IMO 2020 Regulations have required our vessels to comply with its low sulfur fuel requirement since January 1, 2020. We comply with this requirement by using fuel with low sulfur content, which is more expensive than standard marine fuel, or we may upgrade our vessels to provide cleaner exhaust emissions. 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.
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 and termination or suspension of, and substantial harm to, our operations and reputation. 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. For further information on the environmental regulations we are subject to, see “Regulatory matters — Environmental and other regulations.”
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. Vessels constructed on or after September 8, 2017 are required to comply with the D-2 standards on or after September 8, 2017. We are subject to costs of compliance, as the increased costs of compliance are passed on to the charter, which may be substantial and may adversely affect our results of operation and financial condition.
Furthermore, U.S. regulations with respect to ballast water discharge are currently changing. Although the 2013 Vessel General Permit (VGP) program and 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, by December 2020. By approximately 2022, the U.S. Coast Guard must develop corresponding implementation, compliance and enforcement regulations regarding ballast water. The new regulations could require the installation of new equipment, which may cause us to incur substantial costs.
Climate change and greenhouse gas 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 greenhouse gas emissions due to the
 
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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 greenhouse gas emissions with firm target reduction goals, came into force and could result in additional regulation on the shipping industry (although in June 2017, the U.S. President announced that the U.S. would withdraw from the Paris Agreement, which withdrawal became effective on November 4, 2020). In addition, several non-governmental organizations and institutional investors have undertaken campaigns with respect to climate change, with goals to minimize or eliminate greenhouse gas emissions through a transition to a low- or zero-net carbon economy.
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 greenhouse gas emissions, or administer and manage a greenhouse gas 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.
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.
Risks related to our indebtedness
We are highly leveraged. Our leverage may make it difficult for us to operate our business, and we may be unable to comply with our financial covenants or meet related obligations, which could adversely affect our business, financial condition, results of operations and liquidity.
We are highly leveraged and may incur additional debt financing in the future. As of September 30, 2020, the face value of our outstanding indebtedness (including lease liabilities, which include those relating
 
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to vessels charter hire) was $1,707.6 million to be repaid between 2020 through 2036, of which $392.4 million of principal (including short-term bank loans) are scheduled to be repaid during the following 12 months (not including early repayments we expect to make or any additional early repayments we may be required to make in accordance with the excess cash provisions of our notes; see also “Prospectus summary — Recent developments”). Our Series 1 and 2 (tranche C and D) unsecured notes in an aggregate amount of $ 432 million (after giving effect to our partial repurchase of Series 1 (tranche C) notes in October 2020 — see also “Management’s discussion and analysis of financial condition and results of operations — Liquidity and capital resources — Debt and other financing arrangements”) mature in June 2023. Highly leveraged assets are inherently more sensitive to declines in earnings, increases in expenses and interest rates, and adverse market conditions. This may have important negative consequences for our business, including requiring that a substantial portion of the cash flows from our operations be dedicated to debt service obligations, increasing our vulnerability to economic downturns in the shipping industry, limiting our flexibility in planning for or reacting to changes in our business and our industry, restricting us from pursuing certain acquisitions or business opportunities and limiting, among other things, our ability to borrow additional funds or raise equity capital in the future and increasing the costs of such additional financing.
Our ability to generate cash flow from operations to make interest and principal payments on our debt obligations depends on our performance, which is 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 our operations do not generate sufficient cash flow from operations to satisfy our debt service and other obligations, we may need to sell assets, borrow additional funds or undertake alternative financing plans, such as refinancing or restructuring our debt, or reducing or delaying capital investments and other expenses. It may also be difficult for us to borrow additional funds on commercially reasonable terms or at all. Substantially all of our vessels and most of our container fleet are leased by us and accordingly, we have limited assets that we own and are able to pledge to secure financing, which could make it more difficult for us to incur additional debt financing.
The agreements governing our outstanding indebtedness, as well as certain other financial (including certain vessel charter) agreements to which we are party, contain covenants and other limitations which restrict our ability to operate. In addition, although we have been successful in recent financial quarters at deleveraging our indebtedness (i.e., reducing the ratio between our outstanding indebtedness and our Adjusted EBITDA for a trailing 12 month period), we cannot assure you that this trend will continue, and in addition, the marine shipping industry remains capital-intensive and cyclical, and we have in the past, and in the future may continue to experience losses, working capital deficiencies, negative operating cash flow or shareholders’ deficiency. Such losses may not be offset by other cost-cutting measures we may take in the future. Should any of the aforementioned occur, our ability to pursue operational activities that we consider to be beneficial may be affected, which may, in turn, impair our financial condition and operations.
In recent years, due to deteriorating market conditions, we have obtained amendments to certain of our financial covenants, the most recent of which concluded in the third quarter of 2018. However, in June 2020, further to an early repayment to a certain group of creditors (“Tranche A”), such amended covenants were removed and no longer apply. Covenants and limitations in the indentures governing our outstanding notes and other indebtedness currently require us, among other things, to maintain a monthly minimum liquidity of at least $125.0 million and impose other non-financial covenants and limitations such as restrictions on dividend distribution and incurrence of debt and various reporting obligations.
If we are unable to meet our obligations or refinance our indebtedness as it becomes due, or if we are unable to comply with the covenants, we may have to take disadvantageous actions, such as (i) reducing financing in the future for investments, acquisitions or general corporate purposes or (ii) dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on indebtedness. As a result, the ability of our business to withstand competitive pressures and to react to changes in the container shipping industry could be impaired. If we choose not to pursue any of these alternatives and are unable to obtain waivers from the relevant creditors, a breach of any of our debt instruments and/or covenants could result in a default under the relevant debt instruments. Upon the occurrence of such an event of default, the lenders could elect to declare all amounts outstanding thereunder to be immediately due and payable and, in the case of credit facility lenders, terminate all commitments to extend further credit. If the lenders accelerate the repayment of the relevant borrowings, we may not have sufficient assets to repay
 
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any outstanding indebtedness, which could result in a complete loss of business. Furthermore, the acceleration of any obligation under a particular debt instrument may cause a default under other material debt or permit the holders of such debt to accelerate repayment of their obligations pursuant to “cross default” or “cross acceleration” provisions, which could have a material adverse effect on our business, financial condition and liquidity. For additional information, see “Management’s discussion and analysis of financial condition and results of operations — Liquidity and capital resources — Debt and other financing arrangements.”
If we are unable to generate sufficient cash flows from our operations, our liquidity will suffer and we may be unable to satisfy our debt service and other obligations.
Our ability to generate cash flow from operations to make interest and principal payments on our debt obligations 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 our operations do not generate sufficient cash flow from operations to satisfy our debt service and other obligations, we may need to borrow additional funds or undertake alternative financing plans, such as refinancing or restructuring our debt, or reducing or delaying capital investments and other expenses. It may be difficult for us to incur additional debt on commercially reasonable terms, even if we are permitted to do so under our restructured debt agreements, due to, among other things, our financial condition and results of operations and market conditions. Our 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.
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.
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 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 and existing relationships with certain foreign corporations, as well as affect the willingness of potential partners to enter into business arrangements with us. Numerous countries, corporations and organizations limit their business activities in Israel and their business ties with Israeli-based companies. Our status as an Israeli company may limit our ability to call on certain ports and therefore could limit our ability to 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. In addition, our status as an Israeli company may limit our ability to enter into alliances that include certain carriers who are not willing to cooperate with Israeli companies.
Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. In recent years, these have included hostilities between Israel and Hezbollah in Lebanon and Hamas in the Gaza Strip, both of which resulted in rockets being fired into Israel, causing casualties and disrupting economic activities. Recent political uprisings, social unrest and violence in the Middle East and North Africa, including Israel’s neighbors Egypt and Syria, are affecting the political stability of those countries. This instability has raised concerns regarding security in the region and the potential for armed conflict. In addition, Israel faces threats from more distant neighbors, in particular, Iran. Iran is also believed to have a strong influence among parties hostile to Israel in areas that neighbor Israel, such as the Syrian government, Hamas in the Gaza Strip and Hezbollah in Lebanon. Armed conflicts or hostilities in Israel or neighboring countries could cause 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 instance, during the 2006 Lebanon War, a
 
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military conflict took place in Lebanon. As a result of rocket fire in the city of Haifa, we closed our headquarters for several days. 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.
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. 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. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflict involving Israel could adversely affect our business and results and operations.
Further, our operations could be disrupted by the obligations of personnel to perform military service. As of September 30, 2020, we had 694 employees based in Israel, certain of whom may be 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) and, in certain emergency circumstances, may be called to immediate and unlimited active duty. 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.
Provisions of Israeli law and our amended and restated 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). See “Description of share capital — Acquisitions under Israeli law” for additional information.
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 allows for tax deferral in 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
 
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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 prospectus 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 prospectus 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. See “Enforceability of civil liabilities” for additional information on your ability to enforce a civil claim against us and our executive officers or directors named in this prospectus.
Our amended and restated articles of association will 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 amended and restated articles of association to be in effect following this offering will 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 amended and restated articles of association will 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 Companies Law or the Israeli Securities Law of 1968.
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 amended and restated 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 will be 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 amended and restated 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
 
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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 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. Responding to these types of actions by activist shareholders could be costly and time-consuming, disrupting our operations and diverting the attention of management and our employees. Such activities could interfere with our ability to execute our strategic plan. In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and our Board of Directors. The perceived uncertainties as to our future direction also could affect the market price and volatility of our securities.
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.
Risks related to our ordinary shares and the offering
There is no existing market for our ordinary shares, and an active trading market may not develop.
Prior to the listing of our ordinary shares on the NYSE, there was no public market for our ordinary shares, and there can be no assurance that an active trading market will develop, or be sustained, or that the ordinary shares may be resold at or above the initial public offering price. The market value of our ordinary shares could be substantially affected by the extent to which a secondary market develops for the ordinary shares following the completion of this initial public offering.
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. A substantial number of our shares outstanding prior to this offering and our shares issuable upon the exercise of options are subject to lock-up agreements that restrict the ability of their holders to transfer such shares without the prior written consent of the representatives for 180 days after the date of this prospectus. Consequently, upon expiration of the lock-up agreements, substantially all of our outstanding ordinary shares will be eligible for sale in the public market, except that ordinary shares held by our affiliates will be subject to restrictions on volume and manner of sale pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). In addition, approximately 3,742,500 shares of a total of 4,990,000 underlying vested options will be eligible for sale in the public market on the same date. We also intend to file one or more registration statements on Form S-8 with the SEC, covering all of the ordinary shares issuable
 
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under our share incentive plans and such shares will be available for resale following the expiration of any restrictions on transfer. Further, substantially all of our existing shareholders are party to a Registration Rights Agreement. Pursuant to this agreement, at any time beginning 180 days following the date of this prospectus, the shareholders party thereto are entitled to request that we register the resale of their ordinary shares under the Securities Act, subject to certain conditions. See “Certain relationships and related party transactions — Registration rights” for additional information. The market price of our ordinary shares may drop significantly when the restrictions on resale by our existing shareholders lapse and these shareholders are able to sell our ordinary shares into the market. 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 equity securities, and may cause you to lose part or all of your investment in our ordinary shares.
Interests of our principal shareholders could adversely affect our other shareholders.
Following the consummation of this offering, Kenon Holdings, Ltd., or Kenon, will beneficially own approximately 27.9% of our outstanding ordinary shares and voting power, or approximately 27.4% of our outstanding ordinary shares and voting power if the underwriters exercise their option to purchase additional ordinary shares in full. As a result of its voting power, Kenon has and will continue to have the ability to exert influence over our affairs for the foreseeable future, including with respect to the election of directors, amendments to our articles of association and all matters requiring shareholder approval. In certain circumstances, Kenon’s interests as a principal shareholder may differ or even conflict with the interests of our other shareholders, and Kenon’s ability to exert influence over us may have the effect of causing, delaying, or preventing changes or transactions that our other shareholders may or may not deem to be in their best interests. In addition, we have entered into a number of transactions with related parties, which are connected to Kenon, as described in the section entitled “Certain relationships and related party transactions” included elsewhere in this prospectus. Although we have implemented procedures to ensure the terms of any related party transaction are at arm’s length, any alleged appearance of impropriety in connection with our entry into related party transactions could have an adverse effect on our reputation and business.
The State of Israel holds a Special State Share in us, which imposes certain restrictions on our operations and gives Israel veto power over transfers of certain assets and shares above certain thresholds, and may have an anti-takeover effect.
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. These limitations include, among other things, transferability restrictions on our share capital, restrictions on our ability to enter into certain merger transactions or undergo certain reorganizations and restrictions on the composition of our Board of Directors and the nationality of our chief executive officer, among others. 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. In addition, the terms of the Special State Share dictate that we maintain a minimum fleet of 11 wholly owned seaworthy vessels. Currently, as a result of waivers received from the State of Israel, we own fewer vessels than the minimum fleet requirement. However, if we acquire and own additional vessels in the future, these vessels would be subject to the minimum fleet requirements and conditions of the Special State Share, and if we would want to dispose of such vessels, we would need to obtain consent from the State of Israel. For further information on the Special State Share, see “Description of share capital — The Special State Share.”
Investors in this offering will experience immediate substantial dilution in net tangible book value.
The initial public offering price of our ordinary shares in this offering is considerably greater than the net tangible book value per share of our outstanding ordinary shares immediately after this offering. Accordingly, investors in this offering will incur immediate dilution of $14.70 per share, based on the initial public offering price of $15.00 per share. In addition, if outstanding options to purchase our ordinary shares are exercised in the future, you will experience additional dilution. See “Dilution.”
 
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We have broad discretion as to the use of the net proceeds from this offering and may not use them effectively.
We do not currently have specific plans for the net proceeds resulting from this offering and expect to use the net proceeds to support long-term growth initiatives, including investing in vessels, containers and other digital initiatives, to strengthen our capital structure, to foster financial flexibility and for general corporate purposes. As such, our management will have broad discretion in the application of the net proceeds. Our shareholders may not agree with the manner in which our management chooses to allocate the net proceeds from this offering. The failure by our management to apply these funds effectively could have a material adverse effect on our business, financial condition and results of operations. Pending our use of the net proceeds from this offering, we may invest the proceeds in a manner that does not produce income. See “Use of proceeds” for additional information.
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 will be permitted to follow certain Israeli corporate governance practices instead of those otherwise required under the corporate governance standards for U.S. domestic issuers. Following the listing of our ordinary shares on the NYSE, we intend to 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 “Management — Corporate governance practices.”
As a foreign private issuer, we will not be subject to the provisions of Regulation FD or U.S. proxy rules and will be exempt from filing certain Exchange Act reports, which could result in our shares being less attractive to investors.
As a foreign private issuer, we will be 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 will be exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be 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 will generally be exempt from filing quarterly reports with the SEC under the Exchange Act. We will also be 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 intend to voluntarily file current reports on Form 6-K that include quarterly financial statements, and to comply voluntarily with Regulation FD, these exemptions and leniencies will 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 Israeli Companies Law 5759-1999 (the “Companies Law”) will require us, after we become a public company, 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.
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
 
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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.
We have not yet determined whether our existing internal controls over financial reporting systems are compliant with Section 404 of the Sarbanes-Oxley Act, and we cannot provide any assurance that there are no material weaknesses or significant deficiencies in our existing internal controls.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules adopted by the SEC and the Public Company Accounting Oversight Board, starting with the second annual report that we file with the SEC after the consummation of this offering, our management will be required to report on the effectiveness of our internal control over financial reporting. Our independent registered public accounting firm may also need to attest to the effectiveness of our internal control over financial reporting under Section 404 at that time. We have not yet commenced the process of determining whether our existing internal controls over financial reporting systems are compliant with Section 404 and whether there are any material weaknesses or significant deficiencies in our existing internal controls. This process will require the investment of substantial time and resources, including by our Chief Financial Officer and other members of our senior management. In addition, we cannot predict the outcome of this determination and whether we will need to implement remedial actions in order to implement effective internal control over financial reporting. The determination and any remedial actions required could result in us incurring additional costs that we did not anticipate. Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. As a result, we may experience higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation of these changes. If we are unable to implement any of the required changes to our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it could adversely affect our operations, financial reporting and/or results of operations and could result in an adverse opinion on internal controls from our independent auditors.
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 will be in effect following this offering, to distribute each year up to 50% of our annual net income. 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 up to 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 between distributions 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 subject to certain limitations under our existing indebtedness, and may be subject to limitations under any future indebtedness we may incur. Generally, our existing indebtedness permits us to pay dividends (i) in an amount per year of up to 5% of the proceeds we receive from any public equity offering (not including this offering) and (ii) in an amount that does not exceed 50% of our cumulative net income, minus any amounts paid pursuant to clause (i). In addition, the distribution of dividends is limited by Israeli law, which permits the distribution of dividends only out of distributable profits and only
 
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if there is no reasonable concern that such distribution will prevent us from meeting our existing and future obligations when they become due. See “Dividend policy.”
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. In addition, in August 2020, a cruise operator was a victim to ransomware attack. On September 28, 2020, another competitor confirmed a ransomware attack that disabled its booking system, and on October 1, 2020, the IMO’s public website and intranet services were subject to a cyberattack. In December 2020, an Israeli insurance company fell victim to a highly publicized ransomware attack, resulting in the filing of civil actions against the company and significant damage to that company’s reputation. 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, due to 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 recovery and backup measures. 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 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 primary data center is in Europe with a back-up data center in Israel. While we have a disaster recovery plan pursuant to which we are able to immediately activate the back-up data center in the event of a failure at our primary data center, if our primary data center ceases to be available to us without sufficient advance notice, we would likely experience delays in our operating activities.
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.
 
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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, in particular 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 operates. 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.
Labor shortages or disruptions could have an adverse effect on our business and reputation.
We employ, directly and indirectly, approximately 5,115 employees around the globe. We, our subsidiaries and the independent agencies with which we have agreements could experience strikes, industrial unrest or work stoppages. A number 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. If such 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 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 as a result of pension liabilities or other compensation terms.
Our share price may be volatile, and you may lose all or part of your investment.
The initial public offering price for the ordinary shares sold in this offering will be determined by negotiation between us and representatives of the underwriters. This price may not reflect the market price of our ordinary shares following this offering and the price of our ordinary shares may decline. In addition, 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 from the expectations of market analysts;

announcements by us or our competitors of significant business developments, changes in service provider relationships, acquisitions or expansion plans;

our involvement in litigation;

our sale of ordinary shares or other securities in the future;

market conditions in our industry;

changes in key personnel;

the trading volume of our ordinary shares;

changes in the estimation of the future size and growth rate of our markets; and

general economic and market conditions.
In addition, the stock markets generally have experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of our ordinary shares, regardless
 
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of our operating performance. 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.
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 will depend, 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 analysts do not commence coverage of our company, or if one or more of these analysts 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.
We will 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 are listed in the United States, we will 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 anticipate that we will 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. We expect that these rules and regulations will increase our legal and financial compliance costs, introduce new costs such as investor relations and stock exchange listing fees, and will make some activities more time-consuming and costly. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. In addition, we expect that our senior management and other personnel will need to 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 US. 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.
 
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this prospectus that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. Forward-looking statements include, but are not limited to, such matters as:

our expectations regarding general market conditions, including as a result of the COVID-19 pandemic and other global economic trends;

our expectations regarding trends related to the global container shipping industry, including with respect to fluctuations in container supply, industry consolidation, demand, bunker prices, charter/freights rates, container values and other factors affecting supply and demand;

our anticipated ability to make required debt service payments and obtain additional financing in the future to fund capital expenditures, acquisitions and other corporate activities, as well as our ability to refinance indebtedness;

our plans regarding our business strategy, areas of possible expansion and expected capital spending or operating expenses;

our expectation of modifications with respect to our and other shipping companies’ operating fleet and lines, including the utilization of larger vessels within certain trade zones and modifications made in light of environmental regulations;

the expected benefits of our cooperation agreements and strategic alliances, including our alliance with 2M;

our anticipated insurance costs;

our beliefs regarding the availability of crew;

our expected compliance with financing agreements and the expected effect of restrictive covenants in such agreements;

our expectations regarding our environmental and regulatory conditions, including changes in laws and regulations or actions taken by regulatory authorities, and the expected effect of such regulations;

our beliefs regarding potential liability from current or future litigation;

our plans regarding hedging activities;

our ability to pay dividends in accordance with our dividend policy;

our expectations regarding our competition and ability to compete effectively; and

our ability to effectively handle cyber-security threats and recover from cyber-security incidents.
The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only estimates based upon our current expectations and projections about future events. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the risks provided under “Risk factors” in this prospectus.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Each forward-looking statement speaks only as of the date of the particular statement. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus, to conform these statements to actual results or to changes in our expectations.
 
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USE OF PROCEEDS
We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $196.9 million (or approximately $227.1 million if the underwriters exercise their option to purchase additional ordinary shares in full), based on the initial public offering price of $15.00 per share.
The principal purposes of this offering are to obtain additional working capital, to create a public market for our ordinary shares and to facilitate our future access to the public equity markets. We intend to use the net proceeds from this offering to support long-term growth initiatives, including investing in vessels, containers and other digital initiatives, to strengthen our capital structure, to foster financial flexibility and for general corporate purposes. We will have broad discretion in the way that we use the net proceeds of this offering.
 
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DIVIDEND POLICY
Our Board of Directors has adopted a dividend policy, which will be in effect following this offering, to distribute each year up to 50% of our annual net income as determined under IFRS, subject to applicable law, and provided that such distribution would not be detrimental to our cash needs or to any plans approved by our Board of Directors. Any dividends must be declared by our Board of Directors, which will take into account various factors including, inter alia, our profits, our investment plan, our financial position, the progress relating to our strategy plan, the conditions prevailing in the market and additional factors it deems appropriate. While we initially intend to distribute up to 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. For example, our Board may determine that our cash needs for debt service, capital expenditures or operations may increase and that it would not be prudent to distribute dividends. Accordingly, we expect that the amount of any cash dividends we distribute will vary between distributions, and you should not expect that any particular amount will be distributed by us as dividends at any time, even if we have previously made dividend payments in such amount. We have not adopted a separate written dividend policy to reflect our Board’s policy.
Our ability to pay dividends is subject to certain limitations under our existing indebtedness, and may be subject to limitations under any future indebtedness we may incur. Generally, our existing indebtedness permits us to pay dividends (i) in an amount per year of up to 5% of the proceeds we receive from any public equity offering (not including this offering) and (ii) in an amount that does not exceed 50% of our cumulative net income, minus any amounts paid pursuant to clause (i). See “Management’s discussion and analysis of financial condition and results of operations — Liquidity and capital resources—Debt and other financing arrangements — Series 1 and 2 notes.”
In addition, the distribution of dividends is limited by Israeli law, which permits the distribution of dividends only out of distributable profits 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 “Description of share capital — Dividend and liquidation rights.” Generally, dividends paid by an Israeli company are subject to an Israeli withholding tax, except for dividends paid to an Israeli company. For a discussion of certain tax considerations affecting dividend payments, see “Taxation.” Any dividends declared on our ordinary shares will be declared and paid in U.S. dollars.
 
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CAPITALIZATION
The following table sets forth our (i) cash and cash equivalents, (ii) deposits and restricted cash and (iii) consolidated capitalization at September 30, 2020:

on an actual basis; and

on an as adjusted basis to give effect to the issuance and sale of ordinary shares by us in this offering at the public offering price of $15.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
You should read this information in conjunction with our consolidated financial statements and the related notes appearing at the end of this prospectus and the “Management’s discussion and analysis of financial condition and results of operations” section and other financial information contained in this prospectus.
As of September 30, 2020
Actual
As Adjusted
(in millions)
Cash and cash equivalents
$ 350.3 $ 547.6
Deposits and restricted cash(1)
55.7 55.7
Total long-term debt(2)
1,525.3 1,525.3
Ordinary shares, NIS 0.03 par value per share, 350,000,001 shares authorized and 10,000,000 shares issued and outstanding on an actual basis; no par value per share, 350,000,001 shares authorized and 114,500,000 shares issued and outstanding on an as adjusted basis(3)
0.09
Special State Share, no par value; 1 share authorized; 1 share issued and outstanding
Additional paid-in capital
700.2 897.2
Translation and general reserves
1,087.0 1,087.0
Non-controlling interests
5.5 5.5
Accumulated deficit
(1,887.9) (1,887.9)
Total shareholders’ equity (deficiency)
(95.1) 101.8
Total capitalization
$ 1,430.2 $ 1,627.1
(1)
Mainly consists of bank deposits pledged as collateral for a portion of our short-term bank credit.
(2)
Other than lease liabilities (which are accounted as secured by the corresponding leased assets), all of our long-term debt is unsecured. See “Management’s discussion and analysis of financial condition and results of operations — Liquidity and capital resources — Debt and other financing arrangements.” Subsequent to September 30, 2020, we consummated a tender offer and an ancillary private purchase at the same price determined in the tender offer, pursuant to which we repurchased $57.6 million of our outstanding Series 1 bonds for aggregate consideration (including related costs) of $46.7 million. In addition, as a result of improved operating cash flows, we expect to make approximately $85 million of mandatory early repayments of our Series 1 bonds during March 2021 in accordance with the excess cash provisions set forth therein. These repayments resulted, or will result, in corresponding reductions in our total long-term debt and cash and cash equivalents, that are not reflected in the above table.
(3)
The number of shares issued and outstanding on an as adjusted basis assumes that the Pre-IPO Share Split, which will become effective immediately following pricing and prior to the issuance of shares in this offering, had occured as of September 30, 2020. See “Prospectus summary — Recent developments — Pre-IPO share split” for further information on the Pre-IPO Share Split.
 
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DILUTION
If you invest in our ordinary shares in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per ordinary share after this offering. Our net tangible book value (deficit) as of September 30, 2020, after giving effect to the Pre-IPO Share Split, was $(1.63) per ordinary share.
Net tangible book value (deficit) per ordinary share was calculated by:

subtracting our total liabilities from our total tangible assets (i.e., total assets, excluding intangible assets and deferred charter-hire expenses); and

dividing the difference by the number of ordinary shares outstanding, after giving effect to the Pre-IPO Share Split.
After giving effect to the sale of ordinary shares that we are offering at the initial public offering price of $15.00 per ordinary share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value (deficit) on an adjusted basis as of September 30, 2020 would have been $0.30 per ordinary share, after giving effect to the Pre-IPO Share Split. This amount represents an immediate increase in net tangible book value (deficit) of $1.93 per ordinary share to our existing shareholders and an immediate decrease in net tangible book value (deficit) of $14.70 per ordinary share to new investors purchasing ordinary shares in this offering. We determine dilution by subtracting the as adjusted net tangible book value (deficit) per share after this offering from the amount of cash that a new investor paid for an ordinary share.
The following table illustrates this dilution (amounts may not sum due to rounding of fractional cents):
Initial public offering price per ordinary share
$ 15.00
Net tangible book value (deficit) per share as of September 30, 2020, after giving effect to the Pre-IPO Share Split
$ (1.63)
Increase per share attributable to this offering
1.93
Pro forma as adjusted net tangible book value (deficit) per share after this offering
0.30
Dilution per share to new investors in this offering.
$ 14.70
If the underwriters exercise their option to purchase additional ordinary shares in full in this offering, the pro forma as adjusted net tangible book value (deficit) after the offering would be $0.55 per share, the increase in net tangible book value (deficit) per share to existing shareholders would be $2.18 and the decrease in net tangible book value (deficit) per share to new investors would be $14.45 per share, in each case based on the initial public offering price of $15.00 per ordinary share.
The following table summarizes, as of September 30, 2020 the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that existing shareholders paid, on the one hand, and new investors are paying in this offering, on the other hand. The calculation below is based on the initial public offering price of $15.00 per ordinary share before deducting underwriting discounts and commissions and estimated offering expenses payable by us, and gives effect to the Pre-IPO Share Split.
Shares Purchased
Total Consideration
Average Price
Per Share
Number
Percent
Amount
Percent
Existing shareholders
100,000,000 87.3% $ 700,310,000 76.3% $ 7.00
New investors
14,500,000 12.7% $ 217,500,000 23.7% $ 15.00
Total
114,500,000 100% $ 917,810,000 100% $ 8.02
The foregoing tables and calculations exclude:

4,990,000 ordinary shares reserved for issuance under our Option Plan as of September 30, 2020, of which there were options to purchase 4,990,000 shares at a weighted average exercise price of $1.00 per share, in each case, after giving effect to the Pre-IPO Share Split; and
 
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1,000,000 ordinary shares reserved for issuance under our Incentive Plan, after giving effect to the Pre-IPO Share Split. Following the recommendation of our compensation committee and the approval of our audit committee, our Board of Directors approved the grant of options exercisable for our ordinary shares, subject to and on or about the closing of this offering, to a senior member of the Company’s management, with a fair market value (using a Black-Scholes valuation) equivalent to NIS 9.6 million to be translated into USD at the exchange rate in effect on the grant date. Such options shall be granted under our Incentive Plan, at an exercise price per share equal to the public offering price in this offering and exercisable for a term of five years from the grant date, subject to vesting. 25% of the options shall vest upon the first anniversary of the grant date with the remaining options vesting in equal quarterly installments over the following three-year period. The options shall be granted under the capital gains track through a trustee, under Section 102 of the Israeli Income Tax Ordinance (New Version), 1961. Based on an assumed exchange rate as of the grant date and the public offering price of $15.00 per share, such options would be exercisable for approximately 545,766 ordinary shares.
To the extent any of these outstanding options is exercised or ordinary shares are issued, there will be further dilution to new investors. To the extent all of such outstanding options had been exercised as of September 30, 2020, the pro forma as adjusted net tangible book value per share after this offering would be $0.40, and total dilution per share to new investors would be $14.60, in each case, after giving effect to the Pre-IPO Share Split.
If the underwriters exercise their option to purchase additional shares in full:

the percentage of ordinary shares held by existing shareholders will decrease to approximately 85.7% of the total number of our ordinary shares outstanding after this offering; and

the number of shares held by new investors will increase to 16,675,000, or approximately 14.3% of the total number of our ordinary shares outstanding after this offering.
 
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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The selected consolidated financial data set forth below as of December 31, 2019 and 2018, and for each of the years in the three year period ended December 31, 2019 have been derived from our audited consolidated financial statements and the notes thereto included elsewhere in this prospectus. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, and audited in accordance with the standards of the PCAOB. The selected consolidated financial data set forth below as of December 31, 2017, 2016 and 2015 and for the years ended December 31, 2016 and 2015 have been derived from our consolidated financial statements not included in this prospectus, and which have not been audited in accordance with the standards of the PCAOB. Such consolidated financial statements were prepared on a basis consistent with our audited financial statements included in this prospectus. The selected consolidated financial data as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019 have been derived from the unaudited interim consolidated financial statements and the notes thereto included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future and our results of operations for any interim period are not necessarily indicative of the results of operations that may be expected for a full fiscal year or any other interim period.
This information should be read together with, and is qualified in its entirety by, our consolidated financial statements and the notes thereto. You should read the following selected consolidated financial and other data in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and the notes thereto.
Nine Months Ended
September 30,
Year Ended December 31,
2020(1)
2019(1)
2019(1)
2018
2017
2016
2015
(in millions, except share and per share data)
CONSOLIDATED INCOME STATEMENTS
Income from voyages and related services
$ 2,630.9 $ 2,472.5 $ 3,299.8 $ 3,247.9 $ 2,978.3 $ 2,539.3 $ 2,991.1
Cost of voyages and related services:
Operating expenses and cost of services
(2,039.0) (2,125.2) (2,810.8) (2,999.6) (2,600.1) (2,394.1) (2,692.6)
Depreciation
(204.3) (161.3) (226.0) (100.2) (97.2) (86.3) (82.4)
Gross profit
387.6 186.0 263.0 148.1 281.0 58.9 216.1
Other operating income (expenses), net
7.4 30.3 36.9 (32.8) 1.6 31.5 29.3
General and administrative expenses
(114.8) (111.5) (151.6) (143.9) (147.6) (142.5) (147.4)
Share of profits of associates
2.4 3.6 4.7 5.4 7.6 5.0 9.4
Results from operating activities
282.6 108.4 153.0 (23.2) 142.6 (47.1) 107.4
Finance expenses, net
(113.6) (112.5) (154.3) (82.6) (117.0) (98.0) (102.8)
Profit (loss) before income tax
169.0 (4.1) (1.3) (105.8) 25.6 (145.1) 4.6
Income tax
(11.2) (10.1) (11.7) (14.1) (14.2) (18.4) 1.9
Net income (loss)
$ 157.8 $ (14.2) $ (13.0) $ (119.9) $ 11.4 $ (163.5) $ 6.5
Basic net income (loss) per ordinary share(2)
$ 15.29 $ (1.77) $ (1.81) $ (12.57) $ 0.62 $ (16.83) $ 0.23
Weighted average number of ordinary shares used in computing basic net income (loss) per ordinary share(2)
10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
Diluted net income (loss) per ordinary
share(2)
$ 14.66 $ (1.77) $ (1.81) $ (12.57) $ 0.62 $ (16.83) $ 0.23
Weighted average number of ordinary shares used in computing diluted net income (loss) per ordinary share(2)
10,431,079 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
Pro forma basic net income (loss) per ordinary share(2)(3)
$ 1.53 $ (0.18) $ (0.18) $ (1.26) $ 0.06 $ (1.68) $ 0.02
Weighted average number of ordinary shares
used in computing pro forma basic net income
(loss) per ordinary share(2)(3)
100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000
Pro forma diluted net income (loss) per ordinary
share(2)(3)
$ 1.47 $ (0.18) $ (0.18) $ (1.26) $ 0.06 $ (1.68) $ 0.02
Weighted average number of ordinary shares used in computing pro forma diluted net income (loss) per ordinary share(2)(3)
104,310,786 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000
 
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As of
September 30,
As of December 31,
2020
2019
2018
2017
2016
2015
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DATA
Cash and cash equivalents
$ 350.3 $ 182.8 $ 186.3 $ 157.9 $ 157.6 $ 218.7
Total current assets
823.4 630.8 746.6 579.6 465.9 616.3
Total assets
2,197.2 1,926.1 1,826.1 1,802.3 1,703.6 1,912.3
Working capital
(152.5) (295.5) (186.3) (107.1) (65.0) 5.3
Total liabilities
2,292.3 2,178.4 2,050.1 1,895.8 1,804.3 1,833.6
Total non-current liabilities
1,316.4 1,252.0 1,117.2 1,209.1 1,273.4 1,222.6
Total shareholders’ equity (deficit)(4)
$ (95.1) $ (252.3) $ (224.0)