The Gund family had been partners in the Oakland Seals franchise which was moved to Cleveland to become the NHL Cleveland Barons. This franchise was merged with the North Stars franchise and the Gunds became partners in the North Stars' franchise. The Gund family had long wanted to bring hockey back to the San Francisco Bay Area, and asked the NHL for permission to move the North Stars there in the late 1980s, but were vetoed by the league. Meanwhile, a group led by former Hartford Whalers owner Howard Baldwin was pushing the NHL to bring a team to San Jose, where a new arena was being built. Eventually a compromise was struck by the league, where the Gunds would sell their share of the North Stars to Baldwin's group, with the Gunds receiving an expansion team in the Bay Area to begin play in the 1991–92 NHL season. In return, the North Stars would be allowed to participate as an equal partner in an expansion draft with the new Bay Area team. Neither team retains the history of the Seals/Barons franchise.
On May 5, 1990, the Gunds officially sold their share of the North Stars to Baldwin and were awarded a new team in the Bay Area, based in San Jose. Over 5000 potential names were submitted by mail for the new team. While the first-place finisher was "Blades," the Gunds were concerned about the name's negative connotations (weapons, etc) and went with the runner-up, "Sharks." The name was said to have been inspired by the large number of sharks living in the Pacific Ocean. Seven different varieties live there, and one area of water near the San Francisco Bay Area is known as the "Red Triangle" because of its shark population. The team's first marketing head, Matt Levine, said of the new name, "Sharks are relentless, determined, swift, agile, bright and fearless. We plan to build an organization that has all those qualities."
On top of the normal expansion process, the Sharks participated in a draft to select players from the North Stars. The Sharks and Stars then participated in an expansion draft. Both teams selected in the NHL Entry Draft. The Sharks selected second-overall in the first round, and then first-overall in the following rounds. The Sharks selected Pat Falloon with their first pick, regarded widely as a draft bust.
The Sharks' inaugural season was one of the worst all-time in NHL history with only 17 wins. Goaltender Jeff Hackett was named team MVP.