Some assembly required

Quote of the Day

Whether we like it or not, we are engaged in a new era of competition.”

Market Snapshot

• The Dow jumped to another record close—the 70th time this year.
• An Amazon-fueled rally sent the Nasdaq over $7,000 for the first time.
• Berkshire Hathaway stock climbed to $300,000 a share.
• Ethereum finished the day just below $800.

Ikea Tax Evasion: Some Assembly Required

Nothing quite like good ol' fashioned tax evasion. This time, it’s flat-packing, furniture-loving retailer Ikea that’s locked in the EU’s crosshairs.

Ask founder Ingvar Kamprad and he’ll say Ikea’s tax structure is kosher (unlike its Swedish meatballs). But multinational bounty-hunter and EU competition commissioner Margrethe Vestager tells a different story.

One that implicates Ikea in side-stepping $1 billion worth of taxes from ‘09-’14.

So per the EU, here are Ikea’s DIY steps to tax avoidance:

Step 1) Incorporate in the Netherlands (instead of its motherland, Sweden) to take advantage of lenient tax laws. Then...

Split Ikea in two groups: Inter Ikea (the brain behind branding and strategy) and Ikea Group (the retailing arm you know and love). This allowed Inter Ikea to franchise all Ikea Group stores, taking 3% of all Ikea retail revenue.

Step 2) Funnel that revenue to Luxembourg to avoid paying taxes.

According to Vestager, from ‘06-’11 a Netherlands tax ruling permitted Inter Ikea to send money to I.I. Holding—its subsidiary based in Luxembourg. And because I.I. Holding negotiated special tax breaks with the government, most of Inter Ikea’s revenue went untouched and untaxed.

Step 3) When that stops working, switch countries.

After the EU shut the lid on the Luxembourg loophole in 2011, Inter Ikea shipped its Ikea franchise revenue to another Ikea company in Liechtenstein, where a sprinkle of accounting magic allowed it to, once again, avoid paying most of its EU taxes.

(Having trouble with assembly? Call 1-800-IKEA for all your in-home tax evasion needs).

But now, the EU’s feeling confident about a win

Just one look at its record will tell you that. Since 2013, the EU’s European Commision has recovered billions from tax-allergic multinationals. And we think you might recognize some of the names...

Apple? Yup. Amazon? You bet. Starbucks? Grande tax evasion.

In order to come out on top again, the Commission will have to prove that Ikea actually got “better tax treatment than others.”

To which Ikea is saying, “Släng dig i väggen,” roughly translating to “throw yourself against the wall.”

Snack Game Strong for Hershey’s and Campbell Soup

A couple of food takeovers foreshadowing a holiday break when food takes over.

Hershey’s Gets Amped

The chocolate maker bought Amplify, parent of the Brew’s favorite snack, SkinnyPop (though we probably couldn’t afford the $921 million price tag).

If you’re thinking, “wait a sec...popcorn isn’t chocolate!” you’d be correct. Popcorn is, in fact, not chocolate. Something Hershey (+0.11%) is well aware of as it continues expanding beyond its legacy business into the uncharted waters of the $89 billion snack industry.

It wasn’t smooth sailing in the public markets for Amplify, which saw its value cut in half since a 2015 IPO. So what’s the silver lining for Hershey's? A niche product for consumers who are increasingly on-the-go, and an opportunity to pursue its new line of sweet and salty products, called “snackfection.” Awesome.

These Pretzels Are Making Campbell Thirsty...

Snyder’s-Lance pretzels, that is, as Campbell Soup (+0.14%) acquired the snack company for $4.9 billion.

Snyder’s is responsible for your New Year’s resolution to get a gym membership, making everything from those addicting Hanover pretzels to Cape Cod potato chips.

CEO Denise Morrison is hyping the deal up, saying it’ll “dramatically transform Campbell, shifting our center of gravity” from declining soup to surging snacks (3% compound annual growth).

So while some say it may have overpaid, Campbell is looking to M&A to shore up a stock that’s down 18% on the year.

RIP CSX CEO

CSX (+1.25%), the freight rail company waking you up at 3:00 am, is reeling following the death of its 73-year-old CEO Hunter Harrison on Saturday.

If only that was the whole story...

In March, activist investor Paul Hilal led a CEO coup, poaching Harrison from his position leading Canadian Pacific Railway to head CSX. Shareholders applauded the move as Harrison was a rail legend (having turned around two Canadian railroads), and approved a buyout to match: $84 million.

The only problem? The board didn’t notify shareholders Harrison wasn’t in good health. CSX requested a doctor’s stamp of approval before he came on board, but Harrison declined.

And if that wasn’t enough of a red flag, the WSJ reported that Harrison was mostly working from home with the assistance of an oxygen mask (all while controversially slashing costs).

We know what you’re thinking: this has lawsuit written all over it. No doubt questions will be asked about 1) Harrison’s right to privacy and 2) CSX’s obligation to disclose critical info to shareholders.

Twitter’s Little Birdie Told Me You Can't Say That Anymore

Twitter (+11.07%) announced it would be cracking down on hate speech and harassment by having users click through a warning before they see their daily swastika.

The balancing act of maintaining free speech and curbing violent extremism includes banning hateful imagery or symbols and monitoring a user’s behavior “on and off the platform.”

Twitter’s new rules are a seismic shift for the platform and a potentially slippery slope for a company formerly known as “the free speech wing of the free speech party.” After all, Twitter was instrumental as a communication and activism tool during the Arab Spring.

But for every revolution, there is an equal and opposite revulsion

Namely, racism and hate speech. This isn’t the first time Twitter has set sail on the USS Censorship. It has permanently banned the likes of conservative provocateur Milo Yiannopoulos and EpiPen scrooge Martin Shkreli.

So, as long as you’re not affiliated with a hate or white nationalist group, you can tweet to your heart’s content. For now.

What Else Is Happening…

• Oracle (-1.22%) looks to the cloud with its acquisition of Australian project management software firm, Aconex.
• Watch out, CBOE. Rival derivatives exchange CME also launched Bitcoins futures yesterday.
• Airbnb landed a $200 million investment from Brookfield Property Partners.
• ESPN President John Skipper is stepping down due to a substance abuse issue.
• Jake Paul is aiming to be the first social media billionaire. Here’s how he plans to do it.

Economic Calendar

• Monday     Earnings: No Events

                    Economic Events: Housing Market Index (+)

• Tuesday    Earnings: FedEx

                  Economic Events: No Events

• Wednesday    Earnings: Bed Bath & Beyond, General Mills

                        Economic Events: Existing Home Sales

• Thursday   Earnings: Accenture, Nike, The Finish Line

                   Economic Events: GDP, Jobless Claims, Corporate Profits

• Friday       Earnings: No Events

                 Economic Events: Durable Goods, New Home Sales, Consumer Sentiment

And For That Reason, I’m…

We’re kicking off a new series that we’ve knocked off from Shark Tank (don't tell ABC). We'll pitch you a startup and you tell us whether you're IN or OUT.

Let’s deep-learn about SenseTime, a Chinese deep learning startup. The AI company has developed facial recognition technology that’s currently used for photo analysis and payments. Translation: your face might soon be the next way to unlock your bank account or security system.

And forget about ever getting lost in a crowd again. SenseTime’s AI software also enables cars, robots, and mobile devices to recognize faces, voices, languages, or objects. Chinese authorities have already tested the tech to capture criminal suspects in public spaces such as at malls and airports. Which begs the question: when will they be changing their name to Skynet? The other question: how accurate is it? According to SenseTime’s internal metrics, “pretty damn accurate” with an error rate below 0.001%.

Don’t worry, even though SenseTime is at the head of the class with $637 million in funding, it’s not the only one all up in your face. Its competitors include smaller U.S. startups Pilot AI Labs, JingChi, and Netra (which are are all pretty much doing the same thing).

So, we’re asking you, Brew Sharks: are you IN or OUT on SenseTime?

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Question of the Day: 1) Hoover, Dodge 2) Bishop, Earl 3) Dead, Green (Explannation)

Business Trivia: An alligator was not thrown through a Wendy’s drive-thru window.