Wouldn't it be great if X merged with Y? It would make XY! It could be worth billions!
Here’s how the media works at this point:
Step 1: A banker/trader/boulevardier has nothing going on and no fees in sight. He goes out at 4 p.m. with a bunch of buds, and they talk about how the great deals have all been done and so on. Wouldn’t it be great if X merged with Y? It would make XY! The new entity would be worth billions! And think of the fees!
Step 2: The next morning, in his daily schmoozefest with a pal at a big gossip/news website, our banker says that a group of his associates had been talking about XY. He neglects to say that they were all totally saturated and just slinging the old garbanzo around. He might also say that lots of people are talking about it. He may even have worked out a business rationale or two. “This is totally no fingerprints,” he says to the webslinger. “But it’s topic A on the Street. It’s the holy grail.”
Step 3: The website writes the story. The “reporter” may even call around and speak to a few additional quote monkeys who catch her drift and know that they must play along with the premise if they want to be quoted in this widely tweeted digital extrusion. The only entities that are not called are company X and company Y, because that would frankly be a huge buzzkill, since no merger of X and Y is being planned, discussed, or even contemplated.
Step 4: Editors at all the mainstream media call their beat reporters into their offices and rip them a new one for missing what could be the potential deal of the century. How could ChickenFeed get this first? Get on it!
Step 5: A fair number of sites immediately either aggregate or repurpose the story without calling anybody or doing any additional reporting. Tweets explode.
Step 6: All the aforementioned mainstream media outlets race naked through the streets with their hair on fire to avoid being the last to post something about this story. Representatives of X and Y spend hours on the phone trying to convince everybody that the responsible thing to do is not to write about it because it’s not news—it’s simply the product of flatulent banker rumormongering. But time has been spent pursuing the item, and time spent without the generation of online hits is an atrocity that cannot be tolerated by most self-respecting 21st-century news organizations.
Step 7: What are X and Y to do? They can “decline to comment,” or they can deny the rumors as strenuously as possible. A “No comment” is viewed as confirmation of the story. A denial is taken as proof that the deal is imminent.
Step 8: Wall Street is very excited. The stock of X goes up 12% in a matter of hours. Shares of Y do not fare as well, declining 6% in after-hours trading. The prevailing wisdom is that if X does not pull this off, a thorough housecleaning of its senior management is called for.
Step 9: Executives from both companies deny the rumors at all investor meetings they attend, leading to the widespread conviction that they’re a bunch of liars.
Step 10: Time passes. Nothing happens. Why not? Who’s to blame? Coverage dwindles as the ADHD attention span of our times moves on to other enthusiasms. No postings find it necessary to recognize that the original story was a fabrication. There are no retractions. A number of thoughtful pieces do appear in the more intellectual destinations analyzing why this elegant, excellent deal came close but never materialized. Senior management of both companies are scolded. Everybody agrees. What a shame. Dopes.
Step 11: See Step 1, with different letters.
Follow Stanley Bing at stanleybing.com and on Twitter at @thebingblog.
This story is from the January 2015 issue of Fortune.