Which type of distribution typically involves a sale of existing shares by shareholders?

The correct answer is secondary distribution, which typically involves the sale of existing shares by shareholders, rather than the issuance of new shares. In a secondary distribution, previously issued shares are sold in the market, allowing existing shareholders, such as company founders, early investors, or current shareholders, to sell their holdings to new investors.

This type of distribution does not increase the total number of shares outstanding because the shares are being transferred from one owner to another, rather than being created fresh by the company. This process provides liquidity to current shareholders who wish to sell their investment while giving new investors an opportunity to purchase shares of the company.

In contrast, an initial public offering refers to the first sale of a company's stock to the public, where new shares are created, and a primary distribution refers to the issuance of new shares to raise capital. A private placement involves selling securities directly to a select group of investors rather than through a public offering. Each of these other options focuses on different aspects of securities transactions that do not involve the sale of existing shares in the manner that a secondary distribution does.